[kdawg22]

For those that contribute to their IRA, do you go traditional or roth. Also, what do you invest in (stocks, bonds, etc.)

I think it is stupid not to go roth (unless you are over the income limit and can’t) since all earnings are tax free and there is no RMD once you hit 70 1/2. Also, you are allowed to take up to 10k for the first time purchase of a house. You can also do this if it is a traditional IRA but you would be paying tax on that distribution.

[Bourne]

I'm currently in a traditional but will probably be switching over to roth before long. I'm definitely in a lower tax bracket now than I will be when I retire, so it only makes sense to take that tax hit now.

As for what types of investments – I'm currently 23 and 8 months out of college, so I'm in the most risky investments that my plan offers (also happens to be the highest return obviously). I have time to make up for the losses if they occur, and like they say – nothing can beat compounding interest – especially if you get high returns when you're young.

[Recked]

All depends on your tax bracket, and what you anticipate your tax bracket being in retirement.
My bracket is relatively low right now, hence working on the CPA exam, so I do ROTH. Maybe not the best move as I anticipate my income and tax bracket will be lower in retirement, but I can't pass up that tax free growth.
Currently invested in mutual funds focused on growth and dividends.
I would probably recommend index funds for younger folks getting into the market. It's high/inflated right now, but over the course of 3-5 decades when you will touch the money, the market will presumably rise. (Buffet's advice by the way.)

[itooshallpass]

Maybe a silly question, but my employer provides a Simple IRA. Can someone briefly explain the difference?

[Recked]

Basically an IRA that your employer can offer funds match, and also has higher contribution limits than a normal IRA.
If you can afford it, max it out. At an absolute minimum at least max out your employer match, but I strongly recommend maxing out to the limit.
Your future self will thank you… “Feed the Pig”

https://en.wikipedia.org/wiki/SIMPLE_IRA

[itooshallpass]

Thanks Recked. I am maxing out the match right now. I'm brand new to investing and thinking about an S&P index fund…

[Anonymous]

can an individual have both traditional IRA and Roth IRA accounts?

[Bourne]

yes. through my payroll I'm able to specify what percentage I want put into a traditional and what percentage I want in roth

[Recked]

This is a forum full of accountants…
Makes me scratch my head sometimes.

I put your exact question into google and this is the first response.
Yes, an individual can contribute to both a Roth IRA and a Traditional IRA in the same year. The total contribution into both cannot exceed $5,500 for individuals under 50, and $6,500 for those 50 and over. … Income limits for Roth IRA contributions. The current tax rate.

Different rules apply to each as well as phase-outs, etc.

Pro Tip for all you kids out there. You don't need to know all the answers, but it helps if you know how to find the answers.
Google is your best friend and will make your clients think you are a genius.

As for a more technical answer, yes you can open and maintain both types of accounts. You can contribute to one or both, or neither, every year. (As long as you don't go over the max.)
Keep in mind that your brokerage house/broker/investment vehicle will MOST LIKELY charge you a yearly fee for your IRA. If you have 2 accounts you can expect 2 fees.
If you shop around you can probably find companies that charge no annual fee, but make sure its not built into the back or front.
Also, if they charge you a fee, pay it from wages, DO NOT HAVE IT TAKEN FROM THE IRA. Taking it from the IRA reduces your tax deferral advantages, and also reduces your basis that is available to grow over time. Just pay it out of pocket.

[Anonymous]

My 401k is Roth and I won't change it. I started contributing at 21, will earn for 40+ years then withdrawals are tax free. That's a lot of earnings to not have to pay tax on. Not really much difference better the 401k and IRA is regards to the Roth/Traditional benefits imo.

[Bourne]

I was thinking the same thing Recked. It's astonishing how many people don't even know where to begin when it comes to retirement savings. A huge problem we have as a society today.

[mad max]

Don't forget you can contribute about 3x more per year with a 401k opposed to an IRA.
This is important to distinguish as $5,500 savings per year isn't really all that much.

[MeanJoe]

Always contribute, at a minimum, up to the employer's match. If your company offers a match and you do not contribute you are literally throwing away money. It is part of your compensation package.

Check out a three fund portfolio based on your risk tolerance.

https://www.bogleheads.org/wiki/Three-fund_portfolio

Stay away from individual stocks and invest in mutual/index funds.

Always be aware of expense ratios. Stick to Vanguard/Fidelity which have LOW expense ratios for their index/mutual funds.

Do not try to time the market. Do not panic during a correction of the market. Continue to invest.

[kdawg22]

the only issue with the Roth 401(k) is that not all employees offer that. I would love to have that option for mine, but unfortunately my firms plan doesn't allow it.

[Missy]

Don't forget contributions to a Roth don't lower your taxable income in the current year where a traditional IRA does.

It really depends on where in your life stage you are. If you're young and early on in your career you're probably in a lower tax bracket now than you will be at retirement so it makes sense to do a roth and contribute after taxes.

If you're further along in your career and believe you're in a higher tax bracket now than you will be at retirement, a Roth is not the better choice.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[ellejay]

My employer doesn't offer any retirement benefits. I am pretty much screwed. I have a Roth IRA right now, I've been contributing as much as I can to it. I have a broker and he picked out the funds I contribute to but I get about 10-15% gains, and one of the funds I contribute to is high risk the other is low risk. I chose Roth because i do not make enough income to justify offset with traditional, plus you never know what the tax rate will be in 30-40 years from now, so I would rather pay the taxes today and have no or little tax in the future. I'm hoping to get a job in the next year or two (after I get my CPA) that offers retirement and hopefully then I can max out my contributions.

[Author]

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