Roth

[Kathy]

I've discovered the smart extra investment account called the ROTH. This is not the same as a 401K which invests pre-taxed money.

The ROTH takes your already taxed money...puts it into a investment account...grows it...and when you withdraw it (I think at 59.5 years old) you don't owe taxes on it. The growth is tax free!

Have you discovered the ROTH?

[crunchies0313]

I have actually heard a lot of good things about that. I plan to start one in March which is when I will also begin my 401k. I think the best thing is the tax free aspect!!! Other than that I do not know too much about it, but have not heard one bad thing! I can't wait to actually start saving for my future! :)

[PositivelyMental]

Effective in 2006, employers can offer a Roth feature in their 401(k) plans.

It took the IRS awhile to issue some proposed regulations, so employers are slow to adopt this. Watch for it in 2007.

[smalltowngal]

I used to work at a credit union and had to go through several training sessions on IRA's. ROTH IRA's are definitely the way to go, in my opinion. Like Kathy said, it is pre-taxed unlike the Traditional that is taxed at withdrawal. The Roth is a tax-free account; no taxes are paid on the interest, dividends, or gains -- ever. Roth IRA's are also tax-free to heirs of an estate unlike 401K and Traditional IRA. The rules are also relaxed...you do not HAVE TO take distributions at 70 1/2 and you can still contribute at 70 1/2 if you have an earned income. Also, there is no penalty if you withdraw the money after 5 years if you are 59 1/2, death, disability or if you are buying your first home. I have heard a rumor that this plan is SO GOOD that it might be taken away in the future. My suggestion is to start one NOW and make the maximum contribution each year. :thumbsup:

[QuiltAngel]

Yes, I have heard of these. Actually, we have set them up. Don't always get money in them each year. Even had our oldest son set one up. Need to do that with our daughter as she is now earning money.

[crunchies0313]

Wondering if anyone has started one online... Im thinking of opening one on sharebuilder..?? anyone else use sharebuilder?

[Kathy]

I use sharebuilder but not for my ROTH so I know they are reputable. I use them for a smallish DRiP account I purchased online and keep funded automatically online.

The key to the ROTH is max it out every year. This year the max is 4,000. Next year is 5,000....and every few years it should be going up.

[Digitizingqueen]

I started mine last month, only put 100 in it I wont be able to do the whole 4000 but hey every little bit helps already ut my full matching ammount in my 401k (6% matched where I work) I feel like I am behind the 8 ball on retirement as I am 44 and only have about 50K saved... but I am doing the best I can to catch up.... hopfully a raise next year and maybe a bonus will help... we shall see ;)

[shannanigans]

hmm never heard of it but sounds pretty interesting.

[LuvMaui]

I have heard of ROTH, but didn't know the details. I will definately look into one.

Thanks!

[Kathy]

I wanted to revisit this to give a hint for maximizing it every year.

Create a deposit system so that 1/12 is paid towards the maximum every month. Paying yourself first. Taking it out of your income before you even see your paycheck.

By the end of the year you have maxed out your ROTH, having already paid taxes and awaiting the great payout upon retirement.

I've maxed out my ROTH a few years now and haven't missed the money (eeks! not too much. I adjusted my budget to accomodate it and after a few months, it really was quite painless.)

:)