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Red Devil 10-13-2009 08:54 AM

Roth IRA
 
I was thinking about getting a Roth IRA. Is this a good choice? What are the ups and downs and how are the returns?

cmdrost 10-13-2009 09:37 AM

common mis-consception with any IRA. You're returns are based on what you want to invest in. You can buy anything inside your IRA, from money markets, CDs, bonds, mutual funds, to stocks.

IRA is title of the acct only. Set up for tax purposes. Roth IRA are great investment vehicles, esp if young, because your earnings grow tax deferred and you can take your income off of it for free after age 59 1/2.

LaAngler 10-13-2009 09:40 AM

Quote:

Originally Posted by cmdrost (Post 60756)
You can buy anything inside your IRA, from money markets, CDs, bonds, mutual funds, to stocks.


can you explain this in more detail?

cmdrost 10-13-2009 09:44 AM

Most people assume that an IRA is a fixed return investment vehicle, but it depends on what you invest your money in.

The max contribution for an IRA for 2009 is $5000. So if you put $5k into a Roth IRA with me. It first goes to money market. Any cash that hits an acct automatically goes to money market. Now you have $5k in your acct to buy whatever you chose. You can buy CD's, mutual funds, or stocks depending on what your risk/return goals are.

"W" 10-13-2009 09:46 AM

Quote:

Originally Posted by cmdrost (Post 60768)
Most people assume that an IRA is a fixed return investment vehicle, but it depends on what you invest your money in.

The max contribution for an IRA for 2009 is $5000. So if you put $5k into a Roth IRA with me. It first goes to money market. Any cash that hits an acct automatically goes to money market. Now you have $5k in your acct to buy whatever you chose. You can buy CD's, mutual funds, or stocks depending on what your risk/return goals are.


Chas whats the going rate on a 10,000 CD?

mikedatiger 10-13-2009 09:52 AM

Best rate for a 1 year is about 2% (avg is 1.7%). You can get a 3yr at 3% and a 5yr at 3.5%.

Dink 10-13-2009 11:03 AM

Roth IRA is the way to go!! Got one set up for Me and one for Wife............Tax free baby!!! Hope Obama don't hear bout this!! That's alot of money he can get his hands on...............

cmdrost 10-13-2009 11:08 AM

Quote:

Originally Posted by "W" (Post 60773)
Chas whats the going rate on a 10,000 CD?

mikethetiger is in-line with the averages.

Gerald 10-13-2009 04:14 PM

"Regular" IRA's first started back in '84 or '85. The "Roth" IRA's did not start until about '99.

Back when IRA's first started, I did some figuring to see if these new things were any good. After figuring my taxes without putting any money in the IRA and then with putting the max [$ 2000 back then].

For the tax bracket I was in [about average income].....Starting a $ 2000 IRA lowered my taxes by over $ 900. It was like the government gave me [Wow did I just say that ???] a 47 % return on my money just for putting it in an IRA.

The true saving is not the $ 900+ that I saved that year because taxes will have to be paid on that money some day.

cmdrost 10-14-2009 08:25 AM

Regular IRAs are still good investment vehicles. It just depends if you need the tax savings now or later.

Regular IRA, you can claim in on your taxes the year you contribute, Roth you can't

But Roth IRA, income comes out tax free, Regular doesn't

killa k 10-14-2009 10:16 AM

Quote:

Originally Posted by cmdrost (Post 61414)
Regular IRAs are still good investment vehicles. It just depends if you need the tax savings now or later.

Regular IRA, you can claim in on your taxes the year you contribute, Roth you can't

But Roth IRA, income comes out tax free, Regular doesn't

Don't forget there are a couple of catches with the "tax free" income from the Roth. 1st, you have to be over 59 1/2 years old. 2nd, the Roth account has to have been established for 5 years. (Can't start it up at 58 and start getting income at 60 and get all the tax privileges.)

2010 would be a good year to talk to your CPAs about converting Traditional IRAs to Roths because there will be a special provision that will allow you to convert and spread the taxes due over a couple of years. Also the normal income limit exclusion will be waived. This would be something to think about especially if you have several years before retirement and don't need the tax break annually OR if you are approaching 70 1/2 and will be forced to take a Required Distribution on you regular IRA, and you know that you will never need it and want to pass it to heirs. Pay the conversion tax now then never take a withdrawal and let it grow for the next generation.

Just my 2 cents.

txjoker 10-15-2009 11:36 AM

Hell, if you want a better rate of return on your money, look at a whole life policy. I had one with Modern Woodsman. Cashed it in to pay off a credit card. No penalty for early withdrawal. Works just like a savings acct., only better return. Guaranteed 4% rate of return up to 10k investment. Could be more depending on how much you want to insure yourself.

cmdrost 10-15-2009 01:29 PM

life insurance is a whole nother investment animal in and of itself with too many variables to consider, the main one being age.

Personally, I think you're better off managing your money yourself in a 401k and IRA then buying term life insurance for basic coverage.

PUREBAY2200 10-15-2009 02:36 PM

hmmmmm
 
Quote:

Originally Posted by cmdrost (Post 62137)
life insurance is a whole nother investment animal in and of itself with too many variables to consider, the main one being age.

Personally, I think you're better off managing your money yourself in a 401k and IRA then buying term life insurance for basic coverage.


it is basically impossibe to attain coverage -by investing in a 401k or IRA- equal to purchasing term life insurance.

retirement planning is very important, im not saying dont invest.

a 401k or IRA is not inteded to act as life insurance. it takes time to create large amount of money in a retiremnt plan.

term life insurance creates a large amont of money for a small cost.

term life insurance is extremely affordable. premimums ary depending on age and health.


whole life has cash value which can be used during retirement for additional income, all of the cash value is tax free.
also depending on the company whole life insurance can become paid up at some point in time, meaning premeimums can be paid with dividends and the money in the cash value.

both retirement planning and life insurance are essential when creating a financial plan that meets the needs and goals for individuals.

cmdrost 10-15-2009 03:09 PM

"both retirement planning and life insurance are essential when creating a financial plan that meets the needs and goals for individuals. "

Thats whats I was trying to say....guess it came out wrong.

txjoker 10-15-2009 03:27 PM

I said whole life, not term life. Although they are both insurance, their purpose is a bit different I think. The whole life policies can be used as a supplemental. It can be withdrawn at any time without penalty. And, you do not have to die to collect. :)

Quote:

Originally Posted by cmdrost (Post 62137)
life insurance is a whole nother investment animal in and of itself with too many variables to consider, the main one being age.

Personally, I think you're better off managing your money yourself in a 401k and IRA then buying term life insurance for basic coverage.


PUREBAY2200 10-15-2009 03:30 PM

Quote:

Originally Posted by txjoker (Post 62184)
I said whole life, not term life. Although they are both insurance, their purpose is a bit different I think. The whole life policies can be used as a supplemental. It can be withdrawn at any time without penalty. And, you do not have to die to collect. :)


yep, whole life has what i call a "living benefit". the longer u live the more your policy face amount is worth as well as the cash value.

Big Kahunaz 10-15-2009 05:06 PM

Like he said...2 total different investment vehicles.
Traditional IRA's: If you are not covered by an employer sponsored retirement plan you can invest up to 5k . The amount you contribute to the IRA can be deducted from your annual gross income. For individuals covered by an employer sponsored retirement plan, the annual IRA contribution is limited base on the amt of earned income. W/drawls b4 59 1/2 is considered a premature distribution, except in the cases of death, disability, or result of a divorce decree. Premature distributions are then subject to payment of income tax and an additional penalty tax of 10%.

Roth IRA: Your contributions can continue on beyond age 70 1/2 and are never tax deductible. The maximum contribution amt and rules for spouses are the same as a regular IRA. Contributions can be withdrawn tax-free when qualified distributions rules have been met. Roth qualified contributions are not included in gross income, and cant be made prior to the 5th year of the Roth's existence. Each year the penalty decreases as it gets closer to the 5th year. Qualified distributions include those made after 59 1/2 if a qualifying event occurs, such as a qualified distribution for a disabled taxpayer. Unlike regular IRA's, Roth IRA's need not be distributed during the taxpayers lifetime.

ROTH IT! :)

H2OFwlKlr 10-15-2009 09:53 PM

Big K, am I not mistaken that contributions are tax free when withdrawn after 5 years, but earnings on those contributions are taxed and penalized until 59 1/2. I think alot of people forget the difference between the two: contributions and earnings.

Am I correct? I do ROTH's also.

cmdrost 10-16-2009 08:14 AM

no .....both IRA's grow tax deffered on earnings.


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