what questions to ask for Roth IRA

[twoodward15]

I'd like to get a Roth IRA, but the more I read here, the more I think that I should be asking questions. So far I've got to worry about the costs involved, but don't know much more. Can anyone give me some things to llok for or questions to ask? I've got 28 years before retirement and my wife has 27, so we've got time to make money, but we can't afford to dump a lot of money in it at this point (529 plan for the kids, TSP plan). She has a little money in a retirement account at work, but she no longer contributes (doesn't work enough hours there anymore to get any money or matched money contributions). Should I be looking at something other than a Roth IRA???? Any suggestions would be appreciated. Thanks!

 

[ChemEng]

Ive asked the same questions... The general consensus I got back was in 3 camps. 1. Reduce the contributions to TSP to 5% to receive the maximum government matching, then contribute the difference into a Roth. 2. Invest the max into TSP and not use the Roth. 3. Invest the max in TSP and then realizing the dollars created from the tax shield, fund the Roth. (Fancy way to say save more.)

Right now Im doing option 2. But I am leaning more towards option 3 once I get a handle on what my wife's retirement benefits are.

 

[twoodward15]

Is there any sense in getting an IRA to cover my first two years of retirement, then sitting on my thrifty to watch it grow for two years to get a good jump in dollars (assuming everything goes well). I don't know what I'd do with the money I made in the two years, which I am assuming would be quite sizeable if my thrifty stays on track with my calculations. It would be a sizeable sum of money to give to the kids or something. ANyway, is there any sense in getting the IRA to cover 2 years or is it a stupid move? I wouldn't send any less to the thrifty, just put away a bit more to the IRA.

 

[pyriel]

Is there any sense in getting an IRA to cover my first two years of retirement, then sitting on my thrifty to watch it grow for two years to get a good jump in dollars (assuming everything goes well). I don't know what I'd do with the money I made in the two years, which I am assuming would be quite sizeable if my thrifty stays on track with my calculations. It would be a sizeable sum of money to give to the kids or something. ANyway, is there any sense in getting the IRA to cover 2 years or is it a stupid move? I wouldn't send any less to the thrifty, just put away a bit more to the IRA.

Hello twoodward15, Whether you fund TSP 100% or decide to set aside traditional IRA + TSP, you will be in great shape by the timre retirement time comes knocking on your door. I assume that you are mentioning two years because you are honing on SS kicking in at age 62 (80%). If you decide to do latter, i'd suggest on the ROTH instead.

Now, i'd like to go back to your wife's retirement contribution, if she could get a matching from her work, it would be a great idea to fund that first, even before TSP (if you are military and not get matching contribution). Always max out those retirement account that would give you matching.

P

 

[twoodward15]

Pyriel, thanks for the help. here's a bit more info.
I'm a civilian, so I get matching contributions. I give 10%, my wife doesn't get any matching and has not been contributing. I will be able to afford to put more money towards retirement around the first of the year. I am 32, so I have a while before I retire. I was actually thinking about the two years for another reason. I know I'll have enough money to retire on between my govt retirement, TSP and my military retirement. I was going to live off the roth for 2 years, take the money that I earned from TSP for those 2 years and take care of the kids (we have 2), basically paying for their homes or part of them. Lately (since I joined here) I have been very interested in what is happening to my money in the TSP. I track my Thrifty account every morning (on guvmint time, lol) I guess I'm just trying to make the most of my money for retirement.

 

[atcsat64]

The sooner you get the money invested, the better. That is the important thing - to get the money working for you. If it's in TSP it's not taxed going in, but it is taxed coming out. Roth is opposite (I'm sure you know) not taxed coming out. If you start early with a roth, the interest earnings will eventually exceed your input. Put the math to that to see how much you save in income tax. My personal goal was to get maxed in TSP first before contributing to roth only because it was easier to keep up with.

 

[Birchtree]

twoodward15,

Living on tax free money from a Roth IRA is a good idea because you essentially reduce your AGI which sets your tax bracket. Everything going forward is based on adjusted gross income. You can borrow from a Roth and play trader without the hassel of capital gains, most dividend reinvestments are free. Much potential.

 

[atcsat64]

http://biz.yahoo.com/hmoney/061019/101606_easyway_25rules_moneymag.html

Give #6 a look.

 

[robo]

twoodward15,

Living on tax free money from a Roth IRA is a good idea because you essentially reduce your AGI which sets your tax bracket. Everything going forward is based on adjusted gross income. You can borrow from a Roth and play trader without the hassel of capital gains, most dividend reinvestments are free. Much potential.

2007 Roth money, (5K) headed to my Scottrade account in January. 2008 looks like 6K for folks over 50.

Now I get to double that for my wife's account, 10k and 12k. TSP gets a kick up also in 2008. Sweet! I agree with Birchtree on the Roth. Max it out my friends.

Also, nice post atcsat64. Give #6 a look. Putting 1,050 a pay period into TSP the last 3 pay periods so I get my 20K.

 

[thedrewster85]

Scrap the 529 plans, encourage the kids to join the mil and then they can contribute to their TSP and go to college for free!