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R8RFAN
09-01-2012, 10:26 AM
i am confused, some sites say 2k some say 5k then the certain times shit... If I wanted to open a Roth Next week could I? My wife does not work, can married couples open one so I can double contributions?

Can you write off Roth IRA taxes on your taxes?

How safe are they? Tell me what you know.

Nightfyre
09-01-2012, 10:30 AM
Roth IRAs are awesome. 5000 per person per year up to a certain income level. You cannot write off contributions because you are putting in taxed income. But when you cash out you will not have to pay any taxes on the gains.

R8RFAN
09-01-2012, 10:31 AM
Roth IRAs are awesome. 5000 per person per year up to a certain income level. You cannot write off contributions because you are putting in taxed income. But when you cash out you will not have to pay any taxes on the gains.


I work my wife does not, Can I put 10k a year in a Joint Roth if there is such a thing?

DaFace
09-01-2012, 10:31 AM
Annual limit is $5k. You can't write off a Roth on your taxes, but they're tax-free when you eventually pull the money out while traditional IRAs can be deducted now, but you have to pay taxes when you pull them out in the future.

As for safety, they're just like any other investment account. There's no risk of the Roth system collapsing or anything like that like you see with Medicare or whatever. But you're investing, so they can be as safe or as risky as you want them to be depending on what you invest in.

[/not a financial advisor]

Nightfyre
09-01-2012, 10:31 AM
It depends on your income as to how much you can contribute. But yes, you can put together a 10k joint Roth.

DaFace
09-01-2012, 10:32 AM
I work my wife does not, Can I put 10k a year in a Joint Roth if there is such a thing?

No such thing as far as I know. You could do $5k in two of them, though.

DaFace
09-01-2012, 10:33 AM
It depends on your income as to how much you can contribute. But yes, you can put together a 10k joint Roth.

Don't think so, but I could be wrong.

R8RFAN
09-01-2012, 10:34 AM
It depends on your income as to how much you can contribute. But yes, you can put together a 10k joint Roth.

I don't make 125k per year and the wife does not work
No such thing as far as I know. You could do $5k in two of them, though.

Can a person without a job have their own Roth?

Nightfyre
09-01-2012, 10:35 AM
Yea, maybe you can't do joint IRAs. Sorry.

Nightfyre
09-01-2012, 10:35 AM
I don't make 125k per year and the wife does not work


Can a person without a job have their own Roth?

Since you are filing jointly, you can contribute for both of you I think.

lewdog
09-01-2012, 10:36 AM
If you are over 50 can't you contribute 6k instead of the 5k?

R8RFAN
09-01-2012, 10:36 AM
Since you are filing jointly, you can contribute for both of you I think.


Where is the best place to go... Brick and Mortar bank locally or online or what?

R8RFAN
09-01-2012, 10:36 AM
If you are over 50 can't you contribute 6k instead of the 5k?


Thanks I am 46

DaFace
09-01-2012, 10:37 AM
I don't make 125k per year and the wife does not work


Can a person without a job have their own Roth?

I believe so, but it has to be set up in a special way:

The Spousal IRA exception

Fortunately for married couples, there is one way to make a contribution to an IRA if you don't have wagesóa Spousal IRA. This is a tax-advantaged retirement account designed specifically to allow a working spouse to make contributions on behalf of a nonworking spouse. Under current laws, if you're married filing jointly, you can contribute the maximum into an IRA for each spouseóeven if one of you has no earned incomeóas long as the working spouse has income equal to both contributions.

So let's say both you and your spouse are over 50 and want to contribute the maximum of $6,000 to each of your IRAs. Whichever one of you is working would have to have earned income of $12,000 or more to cover both contributions.

Another good thing about the Spousal IRA is that, should the non-working spouse go back to work, he or she can contribute to the same IRA. That's because, once opened, a Spousal IRA is an Individual Retirement Account like any other.

lewdog
09-01-2012, 10:38 AM
Thanks I am 46

I figured you were close so I threw that out there.

Nightfyre
09-01-2012, 10:38 AM
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---IRA-Contribution-Limits

IRS has this posted. Might be helpful.

R8RFAN
09-01-2012, 10:38 AM
I believe so, but it has to be set up in a special way:


Beautiful.... great find this is what I was looking for

DaFace
09-01-2012, 10:40 AM
Where is the best place to go... Brick and Mortar bank locally or online or what?

I don't know enough to have a solid recommendation on this one. We went to Edward Jones to set ours up. It's fine, but their fees are pretty high (something like $40/year plus 3% of transactions). If you're comfortable being more in the driver's seat, I'd bet you could find better options in terms of pure bottom line (which I know you're big on).

Nightfyre
09-01-2012, 10:40 AM
If you make less than 173,000 per year you can contribute 5,000/year to yourself and your wife, provided you are filing a joint tax return.

Nightfyre
09-01-2012, 10:41 AM
I run mine through scottrade. It didn't cost anything to setup or maintain.

R8RFAN
09-01-2012, 10:42 AM
Wife had a 401k when she worked for Jockey (the underwear place) in 2001 and had like 4k in a 401k she rolled it over into a bank IRA ... it's value os like 8k now, with a whopping .45 interest rate ... Can we roll that over into a Roth?

R8RFAN
09-01-2012, 10:43 AM
If you make less than 173,000 per year you can contribute 5,000/year to yourself and your wife, provided you are filing a joint tax return.
Good to go there

I run mine through scottrade. It didn't cost anything to setup or maintain.

Thanks for the tips, will check them out this weekend.

Nightfyre
09-01-2012, 10:44 AM
Rollovers are something you should run by a CPA. hehe.

R8RFAN
09-01-2012, 10:46 AM
I run mine through scottrade. It didn't cost anything to setup or maintain.


How does Scotttrade make money from you?

R8RFAN
09-01-2012, 10:49 AM
I don't know enough to have a solid recommendation on this one. We went to Edward Jones to set ours up. It's fine, but their fees are pretty high (something like $40/year plus 3% of transactions). If you're comfortable being more in the driver's seat, I'd bet you could find better options in terms of pure bottom line (which I know you're big on).


That Scotttrade is looking pretty good right now... I will do some more research.:thumb:

Nightfyre
09-01-2012, 10:50 AM
How does Scotttrade make money from you?

Well, they get transaction fees from some investment purchases. Like when you buy stock there is a $7 fee. But if you aren't juggling your portfolio hardly at all, it's pretty minor. You can also find mutual funds without transaction fees and the like.

R8RFAN
09-01-2012, 10:54 AM
Well, they get transaction fees from some investment purchases. Like when you buy stock there is a $7 fee. But if you aren't juggling your portfolio hardly at all, it's pretty minor. You can also find mutual funds without transaction fees and the like.

OIC thanks for the help

stevenidol
09-01-2012, 11:30 AM
Wife had a 401k when she worked for Jockey (the underwear place) in 2001 and had like 4k in a 401k she rolled it over into a bank IRA ... it's value os like 8k now, with a whopping .45 interest rate ... Can we roll that over into a Roth?

Assuming they were traditional 401ks, you will need to convert the money from the 401k and the traditional IRA to a Roth IRA. Essentially you will be paying taxes on the pretax contributions now, and the newly converted Roth money will continue to grow tax free from then on.

R8RFAN
09-01-2012, 01:01 PM
Assuming they were traditional 401ks, you will need to convert the money from the 401k and the traditional IRA to a Roth IRA. Essentially you will be paying taxes on the pretax contributions now, and the newly converted Roth money will continue to grow tax free from then on.

Would we be taxed that 40% shit like we made a withdrawel from it or just the normal Roth IRA pre taxes?

stevenidol
09-01-2012, 01:08 PM
Would we be taxed that 40% shit like we made a withdrawel from it or just the normal Roth IRA pre taxes?

It's not 40% because it's not counted as a premature distribution. There are calculators online where you enter your age, tax filing status, income, and investment amounts and it will help you decide if you should convert or not.

R8RFAN
09-01-2012, 01:11 PM
It's not 40% because it's not counted as a premature distribution. There are calculators online where you enter your age, tax filing status, income, and investment amounts and it will help you decide if you should convert or not.

It's not but 8 k I would rather pay the taxes now and just roll it into a Roth than fool with it anymore

Demonpenz
09-01-2012, 01:38 PM
Roth IRA's are hot because there is no way taxes will go down in the future. Mine as well pay taxes on that now and withdraw your money later without the taxes. Like I always say. A restaurant doesn't reprint their Menu because the price of dinner went down. Nope they reprint them when the raise prices.

R8RFAN
09-01-2012, 01:51 PM
Roth IRA's are hot because there is no way taxes will go down in the future. Mine as well pay taxes on that now and withdraw your money later without the taxes. Like I always say. A restaurant doesn't reprint their Menu because the price of dinner went down. Nope they reprint them when the raise prices.

Good advice

donkhater
09-01-2012, 04:21 PM
I'm 40 and my wife doesn't work and we set up two Roth IRAs this year. One for her and one for me. Nothing special needed to be done. Since it is post taxed income it doesn't matter if you are employed or not to be eligible for them. 5K eacher year. Done and done.

R8RFAN
09-01-2012, 04:25 PM
I'm 40 and my wife doesn't work and we set up two Roth IRAs this year. One for her and one for me. Nothing special needed to be done. Since it is post taxed income it doesn't matter if you are employed or not to be eligible for them. 5K eacher year. Done and done.

You mean pre taxed income right? How much taxes are we talking about anyhoo

Ace Gunner
09-01-2012, 04:26 PM
For over two years, I’ve been an opponent of the ROTH IRA after the government came out with its tricky dick way to let us all do a “one-time” conversion from our traditional IRA’s. The title of the post written in January, 2010 is called, “Be A Sloth And Don’t ROTH (http://www.financialsamurai.com/2010/01/11/be-a-sloth-and-dont-roth/)“.

In these two years, I’ve become a more mellow, laissez faire blogger who realizes that there’s no point trying to force my views on others if they don’t want to change. Instead, I’ve simply sought to lay out the reasons why I think the way I do, and let you readers decide.

If the choice is between NOT SAVING and saving via a ROTH IRA for your future, then the answer is that one should open up a ROTH IRA rather than piss their money away on stupid stuff that depreciates in value. However, do know that you are still pissing money away by giving some of your money to the government. And if the choice is between choosing a traditional IRA over a ROTH IRA, choosing the traditional IRA is hands down the way to go.

As you readers have demonstrated time and time again, you’re past the basics of personal finance and so am I. Financial Samurai readers are not the target audience of whether one should save or not. Of course we all must save, because eventually, we wil no longer want to work and the government might not be able to support us. We’re probably not even the target audience for the ROTH IRA since many of us can’t even contribute thanks to egregiously low income limits.

Please read the reasons why a ROTH IRA is not a good idea for many of you. If you’re still in favor, at least you know the other side of the story and Uncle Sam thanks you!



DISADVANTAGES OF A ROTH IRA – NOT ALL MILK AND COOKIES

* The government is inefficient. I’m all for patriotism, but if you think the government is efficient with your money, then you are simply not paying attention to the enormous budget deficits on a state-wide and country level. By participating in a ROTH IRA, you are paying your taxes up front, thereby giving the government more of your money to waste! Would you give an alcoholic a beer? Would you give a drug addict some meth? Would you eat a double cheeseburger in front of an obese person who is trying to lose weight? No, no, no! There is a reason why there are $2,000 staplers and $10 staples in the government bureaucracy! Why do you think the Social Security system is so underfunded? The government wastes your money, so don’t give it more.

* The government is smarter than you. The government realizes people are bad with their money, which is why they set up a withholding tax system to make sure people pay throughout the year. If it was up to everybody to pay their year-end taxes at the end of the year, all hell would break loose because people are not disciplined to put money away to meet their obligations! The country would go into instant default. As a result, the government has pushed propaganda on the masses to get them to pay MORE TAXES UPFRONT, hence the introduction of the ROTH IRA. They will spend millions on marketing to highlight why converting to a ROTH and participating in a ROTH IRA is a great idea. Yes, it’s a great idea for them, not for you!

* You allow asymmetric reward or punishment between equals. Not everybody can participate in a ROTH IRA. Only those fortunate enough to make less than $105,000 a year/$165,000 for married couples (it’s always changing). After making more than $122,000 a year for singles, you are shit out of luck! No soup for you. Sorry, but the government doesn’t believe you have the right to save in this way. Discrimination is not OK, just because you aren’t being discriminated against. We need to fight for equality for everybody! The income cap for contribution is too low. The irony is, the government is actually saving people who make more than $105,000-$122,000 a year from paying more taxes and getting tricked into entering the Borg. Unfortunately, there are income limits for contribution on an IRA as well, which are even more egregious at around $66,000 for single filers.

* The math is the same whether you pay now or later. Whether you pay taxes now and let your investment grow tax free, or you let your pre-tax investments grow, and then tax it upon retirement results is more or less the same! Don’t believe me? Do a calculation yourself. Here’s an equation: Y = A * B. Re-arrange to A = Y / B. Or Y = A * B is equal to Y = B * A. Trust me, I was a rock math star in the 2nd grade!

* What will $5,000 do for your retirement? A max contribution of $5,000 a year isn’t going to get you to the promised land. If you are already maxing out your 401K (pre-tax contribution up to $17,000), and you are eligible for a ROTH IRA maximum contribution for a single filer ($105,000 income or less), you probably will get more out of spending your $5,000 on life now. I am a big proponent of aggressive savings, however, if you are only earning up to $88,000 a year in gross income after maxing out the 401K, I’d rather you not tie up that $5,000 in a government savings vehicle until 59.5. Spend it, save it in your own investment account, or keep it liquid.

* You may never reap the fake rewards. Let’s say the math wasn’t the same, and you continue to contribute to your ROTH IRA because you believe in the tax benefits. Unfortunately, you die at age 59. You’re screwed! All those taxes you paid upfront to the cunning government, and you’ll never once get to utilize the returns on your ROTH IRA. What a shame. Guess what? Over those 37 years, the government has happily spent your tens of thousands of dollars on themselves. That makes me sick, and it should make you sick as well. But maybe not, since you are a patriot.

* Withdrawal penalty. The are no withdrawal penalties for the after tax money you contribute to your ROTH IRA. However, if you decide to withdraw money that has been earned from your after tax contributions, then will be penalized by 10% + your normal tax rate. For example, if you contribute $10,000 to your ROTH IRA and it grows to $15,000. There is a 10% penalty on the $5,000 + your normal tax rate. Just don’t be naive to put it past the government to one day tax your after-tax ROTH IRA contributions again upon exit. Look at Social Security, for example. They raised the base case age for full retirement from 62 to 67 for those born after 1960! That’s five long years more one has to wait to receive full SS benefits.

* You chop off your legs and fingers. America is a free country where we can relocate at will. If you live in one of the 43 States where there are State income taxes, then it behooves you not to pay more State income taxes. In California, our state income tax is 8-10.4% and we’ve got a huge budget deficit! There’s no way I’m giving 10% of my hard-earned retirement income to the politicians up in Sacramento to waste. Instead, once I retire, I plan to move to one of the 7 no income-tax states (Nevada, Washington, Wyoming, Florida sound reasonable), and avoid paying 10% state taxes altogether. You have the power to save on taxes just by moving.
CHOOSE THE TRADITIONAL IRA OVER THE ROTH IRA WHILE MAXING OUT THE 401K

If you are a recent college graduate who is at the beginning of their earnings power, then choosing to participate in a ROTH IRA is less egregious than someone who is older and makes more money (up to ~$122,000). It is a good assumption you will make more money in your 30′s, 40′s, and 50′s than in your 20′s and therefore pay more taxes as a result. However, even though you are in the lower tax bracket and assume to make more, go with a traditional IRA and never give more money to the government than you need to.

Do the math. Let’s say you make $50,000 a year and contribute to a ROTH IRA. At $50,000, single, with no deductions, your Federal Tax bill is estimated at around $6,250, equaling an effective tax rate of 12.5%. However, you are squarely in the 25% Federal Tax bracket. Let’s say you are hot stuff now and make $100,000, the very income edge of where you can still contribute to a ROTH IRA. Your Federal Tax bill is now around $18,900, or an effective tax rate of 18.9%. You are in the marginal tax bracket of 28% now. What’s your saving?

Your savings really is nothing, because it’s not about moving up and down the Federal Tax Brackets. It’s about what you think future tax rates will be at for income levels below $105,000, since any more and you get phased out and can’t contribute completely after $122,000! The $122,000 and below income level for single filers is the protected middle class where no politician dare assaults. The middle class is what puts politicians in office and therefore, taxes will unlikely ever go up for this income group!

To humor you, let’s do the math anyway. $5,000 X (18.9%-12.5%) = $320 “savings” or $5,000 X (28% – 25%) = $150 “savings” per year. If these savings were real, they would be somewhat meaningful, but not really. This math is absolutely wrong and therefore, the “savings” is irrelevant.

Final Important Point: If you are a middle income person who generates $122,000 a year or less for your entire life, and is therefore able to contribute to a ROTH IRA, do you really think when you retire, your income will now be more than $122,000 a year, putting you in a higher income tax bracket during withdrawal ceteris paribus? Be realistic. At today’s 10-year risk free rate of 2.2%, you need $5.45 million dollars to generate $122,000 a year in income!


http://www.financialsamurai.com/2012/03/29/disadvantages-of-the-roth-ira-not-all-is-what-it-seems/

lewdog
09-01-2012, 04:26 PM
I setup a Roth IRA earlier this year and went with T. Rowe Price. $20 annual fee if under 10k but no fee if over 10k.

R8RFAN
09-01-2012, 04:34 PM
For over two years, Iíve been an opponent of the ROTH IRA after the government came out with its tricky dick way to let us all do a ďone-timeĒ conversion from our traditional IRAís. The title of the post written in January, 2010 is called, ďBe A Sloth And Donít ROTH (http://www.financialsamurai.com/2010/01/11/be-a-sloth-and-dont-roth/)ď.



I shortened the quote so those on phones can read easier...

Here is my problem... I have a nice sum of cash , I have a nice 401k which I always put at least 15% in sometimes if I need a little tax relief I increase it to 25% to reduce my tax liability...

The money is sitting in a savings account earning shit.... I don't need the money, the money is not getting any interest...I don't have a mortgage or a Car Payment, I want to put it somewhere to make a little money and avoid as many taxes as possible.

ReynardMuldrake
09-01-2012, 04:39 PM
For over two years, Iíve been an opponent of the ROTH IRA after the government came out with its tricky dick way to let us all do a ďone-timeĒ conversion from our traditional IRAís. The title of the post written in January, 2010 is called, ďBe A Sloth And Donít ROTH (http://www.financialsamurai.com/2010/01/11/be-a-sloth-and-dont-roth/)ď.

In these two years, Iíve become a more mellow, laissez faire blogger who realizes that thereís no point trying to force my views on others if they donít want to change. Instead, Iíve simply sought to lay out the reasons why I think the way I do, and let you readers decide.

If the choice is between NOT SAVING and saving via a ROTH IRA for your future, then the answer is that one should open up a ROTH IRA rather than piss their money away on stupid stuff that depreciates in value. However, do know that you are still pissing money away by giving some of your money to the government. And if the choice is between choosing a traditional IRA over a ROTH IRA, choosing the traditional IRA is hands down the way to go.

As you readers have demonstrated time and time again, youíre past the basics of personal finance and so am I. Financial Samurai readers are not the target audience of whether one should save or not. Of course we all must save, because eventually, we wil no longer want to work and the government might not be able to support us. Weíre probably not even the target audience for the ROTH IRA since many of us canít even contribute thanks to egregiously low income limits.

Please read the reasons why a ROTH IRA is not a good idea for many of you. If youíre still in favor, at least you know the other side of the story and Uncle Sam thanks you!



DISADVANTAGES OF A ROTH IRA Ė NOT ALL MILK AND COOKIES

* The government is inefficient. Iím all for patriotism, but if you think the government is efficient with your money, then you are simply not paying attention to the enormous budget deficits on a state-wide and country level. By participating in a ROTH IRA, you are paying your taxes up front, thereby giving the government more of your money to waste! Would you give an alcoholic a beer? Would you give a drug addict some meth? Would you eat a double cheeseburger in front of an obese person who is trying to lose weight? No, no, no! There is a reason why there are $2,000 staplers and $10 staples in the government bureaucracy! Why do you think the Social Security system is so underfunded? The government wastes your money, so donít give it more.

* The government is smarter than you. The government realizes people are bad with their money, which is why they set up a withholding tax system to make sure people pay throughout the year. If it was up to everybody to pay their year-end taxes at the end of the year, all hell would break loose because people are not disciplined to put money away to meet their obligations! The country would go into instant default. As a result, the government has pushed propaganda on the masses to get them to pay MORE TAXES UPFRONT, hence the introduction of the ROTH IRA. They will spend millions on marketing to highlight why converting to a ROTH and participating in a ROTH IRA is a great idea. Yes, itís a great idea for them, not for you!

* You allow asymmetric reward or punishment between equals. Not everybody can participate in a ROTH IRA. Only those fortunate enough to make less than $105,000 a year/$165,000 for married couples (itís always changing). After making more than $122,000 a year for singles, you are shit out of luck! No soup for you. Sorry, but the government doesnít believe you have the right to save in this way. Discrimination is not OK, just because you arenít being discriminated against. We need to fight for equality for everybody! The income cap for contribution is too low. The irony is, the government is actually saving people who make more than $105,000-$122,000 a year from paying more taxes and getting tricked into entering the Borg. Unfortunately, there are income limits for contribution on an IRA as well, which are even more egregious at around $66,000 for single filers.

* The math is the same whether you pay now or later. Whether you pay taxes now and let your investment grow tax free, or you let your pre-tax investments grow, and then tax it upon retirement results is more or less the same! Donít believe me? Do a calculation yourself. Hereís an equation: Y = A * B. Re-arrange to A = Y / B. Or Y = A * B is equal to Y = B * A. Trust me, I was a rock math star in the 2nd grade!

* What will $5,000 do for your retirement? A max contribution of $5,000 a year isnít going to get you to the promised land. If you are already maxing out your 401K (pre-tax contribution up to $17,000), and you are eligible for a ROTH IRA maximum contribution for a single filer ($105,000 income or less), you probably will get more out of spending your $5,000 on life now. I am a big proponent of aggressive savings, however, if you are only earning up to $88,000 a year in gross income after maxing out the 401K, Iíd rather you not tie up that $5,000 in a government savings vehicle until 59.5. Spend it, save it in your own investment account, or keep it liquid.

* You may never reap the fake rewards. Letís say the math wasnít the same, and you continue to contribute to your ROTH IRA because you believe in the tax benefits. Unfortunately, you die at age 59. Youíre screwed! All those taxes you paid upfront to the cunning government, and youíll never once get to utilize the returns on your ROTH IRA. What a shame. Guess what? Over those 37 years, the government has happily spent your tens of thousands of dollars on themselves. That makes me sick, and it should make you sick as well. But maybe not, since you are a patriot.

* Withdrawal penalty. The are no withdrawal penalties for the after tax money you contribute to your ROTH IRA. However, if you decide to withdraw money that has been earned from your after tax contributions, then will be penalized by 10% + your normal tax rate. For example, if you contribute $10,000 to your ROTH IRA and it grows to $15,000. There is a 10% penalty on the $5,000 + your normal tax rate. Just donít be naive to put it past the government to one day tax your after-tax ROTH IRA contributions again upon exit. Look at Social Security, for example. They raised the base case age for full retirement from 62 to 67 for those born after 1960! Thatís five long years more one has to wait to receive full SS benefits.

* You chop off your legs and fingers. America is a free country where we can relocate at will. If you live in one of the 43 States where there are State income taxes, then it behooves you not to pay more State income taxes. In California, our state income tax is 8-10.4% and weíve got a huge budget deficit! Thereís no way Iím giving 10% of my hard-earned retirement income to the politicians up in Sacramento to waste. Instead, once I retire, I plan to move to one of the 7 no income-tax states (Nevada, Washington, Wyoming, Florida sound reasonable), and avoid paying 10% state taxes altogether. You have the power to save on taxes just by moving.
CHOOSE THE TRADITIONAL IRA OVER THE ROTH IRA WHILE MAXING OUT THE 401K

If you are a recent college graduate who is at the beginning of their earnings power, then choosing to participate in a ROTH IRA is less egregious than someone who is older and makes more money (up to ~$122,000). It is a good assumption you will make more money in your 30′s, 40′s, and 50′s than in your 20′s and therefore pay more taxes as a result. However, even though you are in the lower tax bracket and assume to make more, go with a traditional IRA and never give more money to the government than you need to.

Do the math. Letís say you make $50,000 a year and contribute to a ROTH IRA. At $50,000, single, with no deductions, your Federal Tax bill is estimated at around $6,250, equaling an effective tax rate of 12.5%. However, you are squarely in the 25% Federal Tax bracket. Letís say you are hot stuff now and make $100,000, the very income edge of where you can still contribute to a ROTH IRA. Your Federal Tax bill is now around $18,900, or an effective tax rate of 18.9%. You are in the marginal tax bracket of 28% now. Whatís your saving?

Your savings really is nothing, because itís not about moving up and down the Federal Tax Brackets. Itís about what you think future tax rates will be at for income levels below $105,000, since any more and you get phased out and canít contribute completely after $122,000! The $122,000 and below income level for single filers is the protected middle class where no politician dare assaults. The middle class is what puts politicians in office and therefore, taxes will unlikely ever go up for this income group!

To humor you, letís do the math anyway. $5,000 X (18.9%-12.5%) = $320 ďsavingsĒ or $5,000 X (28% Ė 25%) = $150 ďsavingsĒ per year. If these savings were real, they would be somewhat meaningful, but not really. This math is absolutely wrong and therefore, the ďsavingsĒ is irrelevant.

Final Important Point: If you are a middle income person who generates $122,000 a year or less for your entire life, and is therefore able to contribute to a ROTH IRA, do you really think when you retire, your income will now be more than $122,000 a year, putting you in a higher income tax bracket during withdrawal ceteris paribus? Be realistic. At todayís 10-year risk free rate of 2.2%, you need $5.45 million dollars to generate $122,000 a year in income!


http://www.financialsamurai.com/2012/03/29/disadvantages-of-the-roth-ira-not-all-is-what-it-seems/

That's some of the worst financial advice I've ever heard. Not a single sentence applies to my situation.

R8RFAN
09-01-2012, 04:42 PM
That's some of the worst financial advice I've ever heard. Not a single sentence applies to my situation.

When I think about the future, I think about what I can leave for my wife and kid and the lifestyle they would be able to live.

Nightfyre
09-01-2012, 04:54 PM
That's some of the worst financial advice I've ever heard. Not a single sentence applies to my situation.

This.

donkhater
09-01-2012, 05:59 PM
You mean pre taxed income right? How much taxes are we talking about anyhoo

No. The money you put into a Roth is income you receive after taxes. Thus, it does not matter if you have a job or not to contribute to one. I contribute to mine and my wife has one in her name. 5K each per year. This plus 10% into my 401K.

jspchief
09-01-2012, 10:47 PM
No. The money you put into a Roth is income you receive after taxes. Thus, it does not matter if you have a job or not to contribute to one. I contribute to mine and my wife has one in her name. 5K each per year. This plus 10% into my 401K.

Right. You've already paid income tax on the money you put in a Roth.

Slainte
09-02-2012, 02:00 AM
Thus, it does not matter if you have a job or not to contribute to one.

Not sure this is true. I seem to remember reading that you must have earned income for the year in order to contribute to a Roth (dollar for dollar, IIRC). Maybe someone with more knowledge can clarify...

donkhater
09-02-2012, 07:50 AM
Not sure this is true. I seem to remember reading that you must have earned income for the year in order to contribute to a Roth (dollar for dollar, IIRC). Maybe someone with more knowledge can clarify...

Well, my wife has no job and has been contributing to one. Not sure how that's possible if not true

R8RFAN
09-02-2012, 08:06 AM
Not sure this is true. I seem to remember reading that you must have earned income for the year in order to contribute to a Roth (dollar for dollar, IIRC). Maybe someone with more knowledge can clarify...


See this post

http://www.chiefsplanet.com/BB/showpost.php?p=8870114&postcount=14

Ace Gunner
09-02-2012, 08:14 AM
I shortened the quote so those on phones can read easier...

Here is my problem... I have a nice sum of cash , I have a nice 401k which I always put at least 15% in sometimes if I need a little tax relief I increase it to 25% to reduce my tax liability...

The money is sitting in a savings account earning shit.... I don't need the money, the money is not getting any interest...I don't have a mortgage or a Car Payment, I want to put it somewhere to make a little money and avoid as many taxes as possible.

Real estate, specifically commercial property is a great investment. Roth IRA is a token investment.

Find yourself some partners, put an LLC together and get that cash an umbrella.

Slainte
09-02-2012, 08:57 AM
See this post

http://www.chiefsplanet.com/BB/showpost.php?p=8870114&postcount=14

I see. Married people have all the fucking luck. Carry on, then...

donkhater
09-02-2012, 09:33 AM
I see. Married people have all the ****ing luck. Carry on, then...

How so?