Comments on: Have You Maxed Out Your Roth IRA This Year Yet?

By: Financial Samurai

Financial Samurai — Thu, 14 Jan 2010 05:38:08 +0000

Oh, no. I really hope nobody converts to a ROTH IRA or believes in the hype. We’ve got like a 50+ commented post over on my site why converting to a ROTH is a government trick.

Contributing is better than not contributing, but you’ve got to understand the process before you do.

By: MoneyNing

MoneyNing — Mon, 11 Jan 2010 05:46:25 +0000

You are right, and I always truly appreciate everyone’s point of view. This post definitely already assumed that Roth IRA is good.

I like the Roth IRA more than a Traditional IRA (since you are implying this comparison instead of whether retirement accounts are better than taxable accounts) because I think having a large 401k artificially inflates someone’s “outlook” of how much they really have. To me, the numbers is such a small part of personal finance when compared to psychological side of things, thus why I talk about it much more than anything else over here.

For example, while no one got rich with ONLY savings accounts, these conservative people usually have no debt and are doing just fine. That’s mainly why I like Roth, because it gives you a truer picture of what you actually have.

No one really knows what the tax code will be decades down the road, and unpredictability is a HUGE obstacle to someone’s piece of mind during retirement.

Roth money = taxed money = my money

401k = my money – Uncle Sam’s money (a much different beast).

By: Ben

Ben — Mon, 11 Jan 2010 05:29:52 +0000

I’m going to have to disagree with this the whole “cost of waiting until April”. Some brokerages will start making bonus offers in February and March to open up an IRA with them. Also, not everyone has 5k lying around to dump in one of these so tax return time is helpful for rounding up the funds. Now you can make the argument that people should not be giving the IRS an interest free loan by claiming more deductions or what not . . but tax forms ARE intimidating to normal people. In any case, so long as they are making regular contributions, the majority of people don’t need to rush into their 2011 contributions like money is going down the drain and that’s if you plan on living that long.

By: marci

marci — Mon, 11 Jan 2010 03:10:15 +0000

One can live very comfortably on under $20,000 – as you know I am living proof of it…. And my retirement magic number is only $200,000. But – then I am debt free, and will have SS, a small pension of $50/mo, PERS, and I’m working on a 2nd small pension, plus my traditional IRA’s…. Actually, in retirement, the income will be way more than the $20,000 – closer to $$25,000 – so I will actually have plenty – even allowing for inflation, compared to what I am living on today. (which allows for that pesky medicare payment I’ll have to make )

I just think one needs to take into account all the other savings/IRA, 401K, pension, SS, etc… and then figure out how much more one needs over that (if any )

By: JoeTaxpayer

JoeTaxpayer — Mon, 11 Jan 2010 01:54:36 +0000

You post started with a presumption of Roth = Good. I am only trying to make a point. If one retired today, no pension, no other income, it would take over $2M to fill the 15% bracket. As inflation impacts the tax brackets themselves, along with the standard deduction and exemption amounts, it’s not fair to say that since one sees $3M in their account in 30 years that puts them in a higher bracket. Looking forward you’d have to adjust for inflation. If people who are now in the 15% bracket wish to save in a Roth or convert to ‘top off’ that 15% bracket, I have little objection, but those the ’10 law applies to (earning $100K) are the very people who shouldn’t be using Roth in the first place.

By: MoneyNing

MoneyNing — Sun, 10 Jan 2010 21:40:52 +0000

I assume you mean how much people should have in their retirement account, as opposed to how much I expect that my individual circumstances will allow me to accumulate.

I believe most people can live VERY comfortably with $30,000 per person in today’s dollars without debt, even if one includes many luxuries. If you look at it that way ($60,000 a year for couples), and using the 4% withdrawal theory, then having $1.5 million is more than enough even if your money doesn’t grow.

Of course, if you are comfortable with more risks, I think $1 million is fine too in today’s dollars, because I assume by then, that person will own their own home outright and will be in some investments that will grow, even if it’s just for a little bit a year.

By: JoeTaxpayer

JoeTaxpayer — Sat, 09 Jan 2010 21:12:02 +0000

MN – curious, how much do you expect to have in your pre-tax retirement accounts right at retirement? Over $2M in today’s dollars? more/less?
It would take a retiree that much today to withdraw enough to bump toward the top of the 15% bracket. So anyone in the 25% bracket today should hold steady and go pre-tax 401(k) or IRA. If you’re in the 15% bracket right now, I have no issue with the Roth.
A real shame to convert money now, pay 25%, and find you retire in the 10/15% brackets. I see a lot of Roth Mania ™ but little caution.

By: Jessica Roth

Jessica Roth — Sat, 09 Jan 2010 18:43:11 +0000

I don’t know if 6-12 mo of savings is such a big exaggeration as someone mentioned. In this economy, 2-3 years would be make me more comfortable.

By: Ryan

Ryan — Sat, 09 Jan 2010 03:17:38 +0000

I’ve been contributing to a Roth ever since I was working as a teenager. I think its an absolutely fantastic retirement account, especially great for those that start contributing at a young age. And, I completely agree with maxing it out at the beginning of the year, even if you are reducing your emergency fund a bit. very sound advice.

By: Don@Moneyreasons

Don@Moneyreasons — Fri, 08 Jan 2010 18:59:27 +0000

I wish I could! We get too tight financially at the end of the year, with Xmas, 2 December birthdays, and usually a winter vacation (this year was Disney).

For my family, we won’t be able to put the full $5,000 into a Roth Ira until mid summer…

Sounds like a great idea though, I think I will do it that way next year. I won’t have any debt at the end of next month (Feb), so that will make it easier…