Roth IRA - any info or advice?

amother

Thu, Oct 21 2021, 5:34 pm

Anyone investing in Roth ira retirement? Thinking to start one for each of my kids and put away a little each month so it grows and I can use the funds to marry them off.
Is this a smart thing to do? Anyone with experience?

Shazam

Thu, Oct 21 2021, 5:46 pm

You won't be able to open a Roth account for anyone who does not have income.
While you can pull any money deposited into a Roth account without penalty, the growth on the account can't be accessed until at 59.5. You are also limited in how much can be put into Roth accounts annually. If you want to open investment accounts and be able to access the money without special penalty, look into taxable investment accounts at Betterment, Fidelity, or Vanguard. They will have low fees that won't eat away at your gains.

Amarante

Thu, Oct 21 2021, 6:40 pm

As others have posted, Roth is a form of retirement account and only accessible when you reach retirement age or else you are penalized.

For your purposes, start investing in an index fund with either Fidelity or Vanguard which both have low cost funds. Once you have the account, commit to investing a certain amount each paycheck as if it were a bill. For your purposes, you aren't setting up funds specifically for your children although you can obviously fund accounts for them individual.

FWIW, a Roth is generally recommended for those who have lower incomes since you are taxed for the amount invested but not taxed when you withdraw the money during retirement. A standard IRA is also a form of tax reduction for higher income people since you are not taxed on any money you invest but are taxed when you retire. High salaried people assume their marginal tax rate will be lower at retirement and therefore they want to generate tax deductions to the extent possible.

If you work for a company that has a 401 (k) with matching funds that is the best retirement investment of all and anyone who doesn't invest at least what the company matches is essentially giving away a substantial amount of money every pay period.

amother

Yolk

Thu, Oct 21 2021, 7:39 pm

Amarante wrote:

If you work for a company that has a 401 (k) with matching funds that is the best retirement investment of all and anyone who doesn't invest at least what the company matches is essentially giving away a substantial amount of money every pay period.

Can you please explain how 401ks work?
What percentage of a paycheck gets invested?
My employer dies have a401k with matching, but I don't work enough hours to qualify for it. Dis that make sense?

Amarante

Thu, Oct 21 2021, 7:53 pm

amother [ Yolk ] wrote:

Can you please explain how 401ks work?
What percentage of a paycheck gets invested?
My employer dies have a401k with matching, but I don't work enough hours to qualify for it. Dis that make sense?

A 401(k) with matching funds is an employee benefit and so there might qualifications in terms of who gets it such as having worked for a company for a certain period of time. For example, sometimes the matching funds don’t fully vest for a certain period of tome because benefits are theoretically a way to retain employees.

You should speak to the HR department if you have questions because you need specific answers regarding your company’s plan and how you can qualify.

As a general rule, it doesn’t make sense to invest more than matching amounts because investments offered by your employer are limited to certain funds whereas an IRA or Roth is self directed so you can invest in anything.

This is general information because there are also slightly different provisions regarding ability to withdraw funds without penalties as well as amounts that can be invested which are generally higher for older people who often are trying to catch up as they near retirement.