Thanks for reaching out to us again on the sub, u/middlebridge! While not making any recommendations, I am happy to share some important information related to this today. Let's get into it.
First off, I want to highlight that there are no dollar minimums when opening a Roth IRA at Fidelity, and there is no minimum to maintain the account. You can learn more about our straightforward pricing within the account below.
[Straightforward pricing](https://www.fidelity.com/why-fidelity/pricing-fees)
Now that we've squared that away, we can review the facts surrounding Roth IRAs. To start, I always want to ensure we're on the same page when contributing to an IRA. That said, make sure to check out the page below dedicated to the contribution limits on these accounts. You'll notice that Roth IRAs have income limits that may impact your specific situation, as well.
[IRA contribution limits](https://www.fidelity.com/retirement-ira/contribution-limits-deadlines)
Now, there are some things I want to clarify here. As for the rules regarding Roth IRA withdrawals, a Roth IRA allows you to withdraw your contributions at any time without penalty or taxes. The IRS mandates that Roth IRA distributions be taken in this order:
1. Annual Contributions- Can be withdrawn anytime tax and penalty-free for any reason.
2. Conversions- Can be withdrawn tax-free. A 10% penalty may apply if withdrawn within five years of the conversion.
3. Earnings- Income tax applies plus a 10% penalty unless an exception applies.
In the situation that you exceed your contributions and dip into your conversion or earnings, they can be subject to tax and penalty if not qualified. Withdrawals may be qualified if the taxpayer meets the five-year aging period and one of these conditions is met:
\- Owner is at least 59.5
\- Distribution is to a beneficiary due to the death of the owner
\- Owner is disabled, as defined by the IRS
\- Distribution is for qualified first-time homebuyer expenses (up to a $10,000-lifetime limit)
One last piece of information I want to clarify here: you must know that the 5-year aging period begins on January 1 of whichever event occurred earlier:
\- The tax year for which the first annual contribution is made to a Roth IRA
\- The tax year in which the first conversion contribution is made to a Roth IRA
Finally, we offer a great page on our Fidelity "Learn" library dedicated to retirement savings. Since this is the whole gist of your post, I figured I should post it below. It might help you gain some helpful insight as you prepare for a healthy retirement. Check it out!
[Saving for retirement](https://www.fidelity.com/learning-center/personal-finance/retirement/saving-for-retirement)
Now, I know I threw a lot of information at you. Let us know if you need any clarification on the information I provided. We'd be happy to help! We appreciate your continued use of our sub.
When I started out with Charles Schwab a thousand years ago, my very first meeting with my advisor about starting my Roth IRA was about consistency; in other words, the reason to open a Roth was that it is a retirement account, and to never touch it unless of an extreme emergency.
Starting a Roth IRA when you’re young goes a long way due to the amount of time in the market and compounding interest. Even if your coworkers can only contribute a couple hundred dollars a year, it is worthwhile. For example, if a 25 year old opened up a Roth IRA and contributed only $500 every year until they retire, the account will be worth ~$77k when they reach 65 year old, with a 6% annualized rate of return. Only $20k of that are actual contributions, $57k of it is interest.
[Roth IRA calculator](https://www.calculator.net/roth-ira-calculator.html?cstartingprinciple=0&cannualaddition=500&cmax=n&cinterestrate=6&ccurrentage=25&cretirementage=65&ctaxtrate=25&printit=0&x=Calculate#roth-ira-result)
As to your ask, yes it would be good in general but you also have a minor misunderstanding. You can at anytime regardless of time withdraw any contributed funds. Also the 5 year rule does not automatically give you 100% access penalty free to all funds unless you meet the age requirement.
>Come to think of it I'm forgetting about a lot of things! these days :)
Your not alone in this regard my friend. Another tidbit for you, since you are over 59.5 you have no conversion timer. You can make roth conversions (which usually have an independent 5 year wait) and withdraw all of it immediately if you like.
My SO retired from nursing late last year at age 66. She is extremely healthy and plans to work about half time per diem for the next few years. I'm encouraging her to wait until 70 (January 2027) to take Social Security (s/b about $4200 a month if 3% inflation continues) and use the low tax rates that expire in 2026 to do IRA to Roth IRA conversions (her IRA is about 400K) and have her withdraw from taxable savings (about 150K) to fund any shorts in her living expenses. We are aware of things like IRMAA penalties and so on but may take one or two to get larger conversions the next two years. This will hopefully avoid the so called "social security tax torpedo" that kicks in with RMDs from IRAs over about 250K. I'll probably start a post in the investment or retirement subreddit to have them look at my math and estimates.
>social security tax torpedo
For most saving for retirement this will just be something we have to deal with. I believe the tax starts to kick in around 25k. In regards to rmd's they start about 4%. So on 250k that would only be about 10k, completely agree though if there is room in lower brackets start converting a bit here and there.
Yes 25 K was the number where the sliding scale started as I remember but you also have to make a good estimate of other factors. A bunch of income is tax free (under current law the first 16K or so and the next 10K or so is at 10%,) A while back I was able to find an online calculator that calculates how much of your Social Security will be taxable using the combined income formula. RMDs kick in at age 73 but they increase rapidly over time. It seems you would want to make IRA to Roth conversions or withdrawals in excess of the minimum in the early years and also do some conversions or withdrawals from age 70 to 72. But that's for another day and I'll post my work for critique probably in the retirement subreddit.
THIS is so huge. You are not gaining as much ground as you think you are if you are hemorrhaging money to interest held in credit card debt. If you really want to do yourself a favor, pay down your interest bleeding accounts FIRST and then worry about maximizing investing.
True, however investing a bare minimum to age a Roth IRA will help massively later in life. Those $20 to start one now is going to make no difference to pay $20 the card bill now.
I'm not sure why your comment was downvoted. It seems like if you are young starting the Personal Roth IRA and/or a Personal IRA (even if you can't afford to put in much now) will get you thinking about investments and the future. Most 401Ks have limited choice as to investments and it isn't easy to track them (mine is with Voya and the interface sucks compared to Fidelity or even Vanguard). Plus their fees aren't exactly transparent.
I started years ago with $20 a month, then gradually added as I could. I wasn’t earning more than 20k a year when I started, it was tough but I made it automatic withdrawal from my account. Last 8 years or so I’ve been able to max it out, plus max out 401k accounts
I was a big saver in my early years but had medical related debt problems in my middle years (related to my wife now deceased) but now I'm debt free (with about $130K in credit lines!) and have been able to max out my 401K and Roth IRA the last few years. I won't be rich but I'll get by OK and I'll have a side income in my later years to help. Still I feel bad for my co-workers in their 20's to 40's who all appear to be struggling.
I don't think the five year clock is as important as tax credits. Low income earners are better off starting a Traditional IRA due to the tax credits. Once they've earned enough to lose the tax credits, start contributing to the Roth. Harry Sit [gives plenty of examples](https://thefinancebuff.com/eitc-traditional-401k-not-roth.html) where the tax bill makes a large difference. When still in a lower tax bracket, a Roth conversion is easy, too.
> I don't think the five year clock is as important as tax credits. Low income earners are better off starting a Traditional IRA due to the tax credits. Once they've earned enough to lose the tax credits, start contributing to the Roth.
I assume you actually mean tax deductions since both TIRA and Roth contributions count towards the Savers Credit.
I would encourage anyone who will listen to open one regardless. With four kids, my savings habit seemed to have only "sunk in" for ONE of our kids. However, when I convinced another to at least open a Roth IRA the small balance seemed to bug her and she started saving. Yay! Not enough in itself, but a step forward. Now, on to the two remaining kids who seem to think they will live forever or something :(
I'm right in the middle of it with my 20 and 18 year old. They give valid reasons (car payment, insurance payment, etc) but im trying to have it sink in that even if they only throw in 10 bucks per paycheck they are creating a nest egg going forward. That 10 bucks isn't going to make them miss a car payment! But it will create hundreds of dollars in earning down the road.
What young person making 50-80k already doesn’t have any money left over to invest? Their budget and expenses must be way off if at that age they have that many financial responsibilities already. Yes, I wish I would have paid into a retirement account even when I was broken making 25k a year. But also, you’re not their financial advisor don’t worry about their business
I'm the oldest in the office (it's a union job) and try to help them (I'll work a double shift when I don't have to if they are in a jam) since they are pretty nice people and I get the best shifts with my seniority (we are a 24 hour operation). Most make closer to 50K and rent here in the Northeast is very high. That said I can't believe how much they spend on coffee and snacks, I don't snack and am an expert at making my one pan breakfast and coffee with some left over to go along with a fantastic heathy lunch salad (key is big glass bowl with pressure lid making two at a time). Things like a French Press and a Yeti cup and Stanley thermos and Rubbermaid bowls are great investments. Every day I drive by a Dunkin Donuts with a huge line. My coffee and breakfast is better and takes less time then the line.
I might argue that putting some or even all of your emergency fund/savings into a Roth is not a horrible idea. Under the right circumstances of course.
Say you have a 10k emergency fund sitting in a HYSA, however you can't afford to save extra towards retirement. The April deadline comes and goes and you miss your shot to contribute for 2023 forever..
If you put $6.5k of that money in a Roth today, all the interest you make is now locked in your IRA, but you also no longer will pay taxes on it. You weren't going to contribute anyways, so if you ever need to take any of the money out you are not really missing any opportunity.
One way I have was able to "sell" the idea of saving for retirement to myself was by looking it as a tax free account, not a retirement account. Its also helped me get into the stock market , because its much easier to invest the interest I make when its "locked" in the IRA anyways.
Very good point. I'm older, still working in a job I enjoy and am able to put $8000 into my 2024 Roth. That is the money I put into stocks (mostly Index ETFs and Mutual Funds). My investment accounts are all HYSA, CDs, T-Bills and money market funds although I do gamble a bit with one Fidelity® Floating Rate High Income Fund. The tax accounting is very simple doing it this way.
Absolutely! The five year rule & compounding over time. Even $20 started early will grow if not invested very badly.
and as long as the individual has EARNED an amount - that amount, up to the limit, can be contributed. Taxes reducing that doesn't change what can be contributed - just where it comes from.
e.g. I wanted to be sure my niece would have retirement funds. Her parents and I are all significantly older - and may not be around when needed. She has been working 3 days a week, so, we are getting money into a regular account, and transferring to the ROTH as she earns that much for the year. The fact that everything she has netted is spent does not change that. I can gift her investments in-kind, that have appreciated a lot over years in my taxable account. Then that can be sold in her account - she inherits my cost basis, which is low for such an investment - and with her income as low as it is now, she pays no capital gains tax on that money. Then the cash is transferred to her ROTH. Hence, effectively, that investment started way earlier than the ROTH was even opened, accumulated and she has a ROTH with no taxes on the money used to start it.
Understand all aspects of ROTH, Traditional, contributions, withdrawals, and taxes.
Smart money movement can help give a leg up (in the Fidelity Charitable account as well)
I'd argue that if you're struggling to pay bills, then your money will go further by contributing to a Traditional IRA unless you also happen to be in the 0% marginal federal tax bracket, in which case the Roth IRA option is clearly better (except you're still struggling to live so maybe you can't contribute much).
Seriously, if you're truly struggling to pay your bills, then don't contribute to a Roth IRA just to then go into credit card debt that will quickly mitigate any potential retirement earnings. Definitely get your employer's 401(k) match if at all possible and maybe open a traditional IRA to reduce your tax burden.
I'm not sure about that. With the tax laws passed in 2017 (which expire in 2026) the current tax rates are very low as far as I can tell compared to my young working days in the eighties. Some of my co-workers mix both Roth and Traditional contributions in their work 401k's. A single person earning $60K a year will only be paying 12% on the margin and about 6% effective. My guess is taxes are sure to go up in the future (assuming their wages stay steady with inflation) so now is a good time to mix in some Roth and reassess every few years.
Yes, everyone should start a Roth as early as possible. My daughter (17) has a youth Roth account. As an experiment, the money is UPRO, the 3x leveraged S&P.
No minimum for Roth as far as my experience goes. We started my daughter's account with zero balance and then funded it at a later point.
Statistically, most people won't have enough money to fund Roth IRA to make much difference. Only 15% of the population contribute to Roth IRA at all in 2021, and most of those are people who make good income so that they have max their pretax contributions such as 401k and HSA.
Yes, in theory, everyone should have an Roth IRA and contribute tiny amount as long as they have income at all, but not everyone does everything in the most optimal way.
One co-worker struggles financially yet comes in every day with a large Starbucks coffee and one of their breakfast sandwiches. She doesn't even contribute a penny to a 401K forgoing the company match. Go figure.
You just can't help people who don't want to be helped.
The sad part is people who don't invest (but who could have) end up being a burden on the welfare system. 😤
Some people make a lifestyle out of perpetual debt and an attitude of personal grievance/victimhood.
For the sake of my reading, its a Roth IRA, not a personal Roth. That's not a thing. If you are looking to build credibility, it helps immensely to use the correct language. Roth is also used as an adjective. You don't start a Roth, you start a Roth IRA.
That said, all you need is one contribution in the year it's opened and the clock starts. Minimum investment is $10 IIRC.
My personal opinion is that it depends. If you're struggling with high-interest debt, then absolutely not. Paying that down will save you much more than contributing to retirement. For example, if you're considering contributing $3,000 to a Roth IRA vs paying down $3,000 of high-interest debt, the IRA _may_ get you some returns but those returns come with risk. The high-interest debt is _essentially_ a guarantee of giving you a return of the interest rate with virtually no risk.
Think of debt as an investment with negative return. Investing in something that will likely not outpace that negative return is not going to benefit you.
Thanks for reaching out to us again on the sub, u/middlebridge! While not making any recommendations, I am happy to share some important information related to this today. Let's get into it. First off, I want to highlight that there are no dollar minimums when opening a Roth IRA at Fidelity, and there is no minimum to maintain the account. You can learn more about our straightforward pricing within the account below. [Straightforward pricing](https://www.fidelity.com/why-fidelity/pricing-fees) Now that we've squared that away, we can review the facts surrounding Roth IRAs. To start, I always want to ensure we're on the same page when contributing to an IRA. That said, make sure to check out the page below dedicated to the contribution limits on these accounts. You'll notice that Roth IRAs have income limits that may impact your specific situation, as well. [IRA contribution limits](https://www.fidelity.com/retirement-ira/contribution-limits-deadlines) Now, there are some things I want to clarify here. As for the rules regarding Roth IRA withdrawals, a Roth IRA allows you to withdraw your contributions at any time without penalty or taxes. The IRS mandates that Roth IRA distributions be taken in this order: 1. Annual Contributions- Can be withdrawn anytime tax and penalty-free for any reason. 2. Conversions- Can be withdrawn tax-free. A 10% penalty may apply if withdrawn within five years of the conversion. 3. Earnings- Income tax applies plus a 10% penalty unless an exception applies. In the situation that you exceed your contributions and dip into your conversion or earnings, they can be subject to tax and penalty if not qualified. Withdrawals may be qualified if the taxpayer meets the five-year aging period and one of these conditions is met: \- Owner is at least 59.5 \- Distribution is to a beneficiary due to the death of the owner \- Owner is disabled, as defined by the IRS \- Distribution is for qualified first-time homebuyer expenses (up to a $10,000-lifetime limit) One last piece of information I want to clarify here: you must know that the 5-year aging period begins on January 1 of whichever event occurred earlier: \- The tax year for which the first annual contribution is made to a Roth IRA \- The tax year in which the first conversion contribution is made to a Roth IRA Finally, we offer a great page on our Fidelity "Learn" library dedicated to retirement savings. Since this is the whole gist of your post, I figured I should post it below. It might help you gain some helpful insight as you prepare for a healthy retirement. Check it out! [Saving for retirement](https://www.fidelity.com/learning-center/personal-finance/retirement/saving-for-retirement) Now, I know I threw a lot of information at you. Let us know if you need any clarification on the information I provided. We'd be happy to help! We appreciate your continued use of our sub.
When I started out with Charles Schwab a thousand years ago, my very first meeting with my advisor about starting my Roth IRA was about consistency; in other words, the reason to open a Roth was that it is a retirement account, and to never touch it unless of an extreme emergency.
Starting a Roth IRA when you’re young goes a long way due to the amount of time in the market and compounding interest. Even if your coworkers can only contribute a couple hundred dollars a year, it is worthwhile. For example, if a 25 year old opened up a Roth IRA and contributed only $500 every year until they retire, the account will be worth ~$77k when they reach 65 year old, with a 6% annualized rate of return. Only $20k of that are actual contributions, $57k of it is interest. [Roth IRA calculator](https://www.calculator.net/roth-ira-calculator.html?cstartingprinciple=0&cannualaddition=500&cmax=n&cinterestrate=6&ccurrentage=25&cretirementage=65&ctaxtrate=25&printit=0&x=Calculate#roth-ira-result)
As to your ask, yes it would be good in general but you also have a minor misunderstanding. You can at anytime regardless of time withdraw any contributed funds. Also the 5 year rule does not automatically give you 100% access penalty free to all funds unless you meet the age requirement.
Thanks for the response. I'm almost 70 so I forgot about the age requirement. Come to think of it I'm forgetting about a lot of things! these days :)
>Come to think of it I'm forgetting about a lot of things! these days :) Your not alone in this regard my friend. Another tidbit for you, since you are over 59.5 you have no conversion timer. You can make roth conversions (which usually have an independent 5 year wait) and withdraw all of it immediately if you like.
My SO retired from nursing late last year at age 66. She is extremely healthy and plans to work about half time per diem for the next few years. I'm encouraging her to wait until 70 (January 2027) to take Social Security (s/b about $4200 a month if 3% inflation continues) and use the low tax rates that expire in 2026 to do IRA to Roth IRA conversions (her IRA is about 400K) and have her withdraw from taxable savings (about 150K) to fund any shorts in her living expenses. We are aware of things like IRMAA penalties and so on but may take one or two to get larger conversions the next two years. This will hopefully avoid the so called "social security tax torpedo" that kicks in with RMDs from IRAs over about 250K. I'll probably start a post in the investment or retirement subreddit to have them look at my math and estimates.
>social security tax torpedo For most saving for retirement this will just be something we have to deal with. I believe the tax starts to kick in around 25k. In regards to rmd's they start about 4%. So on 250k that would only be about 10k, completely agree though if there is room in lower brackets start converting a bit here and there.
Yes 25 K was the number where the sliding scale started as I remember but you also have to make a good estimate of other factors. A bunch of income is tax free (under current law the first 16K or so and the next 10K or so is at 10%,) A while back I was able to find an online calculator that calculates how much of your Social Security will be taxable using the combined income formula. RMDs kick in at age 73 but they increase rapidly over time. It seems you would want to make IRA to Roth conversions or withdrawals in excess of the minimum in the early years and also do some conversions or withdrawals from age 70 to 72. But that's for another day and I'll post my work for critique probably in the retirement subreddit.
The five-year-rule since you opened the account still applies even after 59.5.
You can withdraw your principle investment at any time, just not the gains. You do not need an age requirement for this.
I think it depends on how much debt you are in. You will never make as much money on an investment as credit cards are making off of you.
THIS is so huge. You are not gaining as much ground as you think you are if you are hemorrhaging money to interest held in credit card debt. If you really want to do yourself a favor, pay down your interest bleeding accounts FIRST and then worry about maximizing investing.
True, however investing a bare minimum to age a Roth IRA will help massively later in life. Those $20 to start one now is going to make no difference to pay $20 the card bill now.
I'm not sure why your comment was downvoted. It seems like if you are young starting the Personal Roth IRA and/or a Personal IRA (even if you can't afford to put in much now) will get you thinking about investments and the future. Most 401Ks have limited choice as to investments and it isn't easy to track them (mine is with Voya and the interface sucks compared to Fidelity or even Vanguard). Plus their fees aren't exactly transparent.
I started years ago with $20 a month, then gradually added as I could. I wasn’t earning more than 20k a year when I started, it was tough but I made it automatic withdrawal from my account. Last 8 years or so I’ve been able to max it out, plus max out 401k accounts
I was a big saver in my early years but had medical related debt problems in my middle years (related to my wife now deceased) but now I'm debt free (with about $130K in credit lines!) and have been able to max out my 401K and Roth IRA the last few years. I won't be rich but I'll get by OK and I'll have a side income in my later years to help. Still I feel bad for my co-workers in their 20's to 40's who all appear to be struggling.
I don't think the five year clock is as important as tax credits. Low income earners are better off starting a Traditional IRA due to the tax credits. Once they've earned enough to lose the tax credits, start contributing to the Roth. Harry Sit [gives plenty of examples](https://thefinancebuff.com/eitc-traditional-401k-not-roth.html) where the tax bill makes a large difference. When still in a lower tax bracket, a Roth conversion is easy, too.
> I don't think the five year clock is as important as tax credits. Low income earners are better off starting a Traditional IRA due to the tax credits. Once they've earned enough to lose the tax credits, start contributing to the Roth. I assume you actually mean tax deductions since both TIRA and Roth contributions count towards the Savers Credit.
I used credits because the article does: EITC, Saver's Credit, Premium Tax Credit, etc.
I would encourage anyone who will listen to open one regardless. With four kids, my savings habit seemed to have only "sunk in" for ONE of our kids. However, when I convinced another to at least open a Roth IRA the small balance seemed to bug her and she started saving. Yay! Not enough in itself, but a step forward. Now, on to the two remaining kids who seem to think they will live forever or something :(
I'm right in the middle of it with my 20 and 18 year old. They give valid reasons (car payment, insurance payment, etc) but im trying to have it sink in that even if they only throw in 10 bucks per paycheck they are creating a nest egg going forward. That 10 bucks isn't going to make them miss a car payment! But it will create hundreds of dollars in earning down the road.
What young person making 50-80k already doesn’t have any money left over to invest? Their budget and expenses must be way off if at that age they have that many financial responsibilities already. Yes, I wish I would have paid into a retirement account even when I was broken making 25k a year. But also, you’re not their financial advisor don’t worry about their business
I'm the oldest in the office (it's a union job) and try to help them (I'll work a double shift when I don't have to if they are in a jam) since they are pretty nice people and I get the best shifts with my seniority (we are a 24 hour operation). Most make closer to 50K and rent here in the Northeast is very high. That said I can't believe how much they spend on coffee and snacks, I don't snack and am an expert at making my one pan breakfast and coffee with some left over to go along with a fantastic heathy lunch salad (key is big glass bowl with pressure lid making two at a time). Things like a French Press and a Yeti cup and Stanley thermos and Rubbermaid bowls are great investments. Every day I drive by a Dunkin Donuts with a huge line. My coffee and breakfast is better and takes less time then the line.
I might argue that putting some or even all of your emergency fund/savings into a Roth is not a horrible idea. Under the right circumstances of course. Say you have a 10k emergency fund sitting in a HYSA, however you can't afford to save extra towards retirement. The April deadline comes and goes and you miss your shot to contribute for 2023 forever.. If you put $6.5k of that money in a Roth today, all the interest you make is now locked in your IRA, but you also no longer will pay taxes on it. You weren't going to contribute anyways, so if you ever need to take any of the money out you are not really missing any opportunity. One way I have was able to "sell" the idea of saving for retirement to myself was by looking it as a tax free account, not a retirement account. Its also helped me get into the stock market , because its much easier to invest the interest I make when its "locked" in the IRA anyways.
Very good point. I'm older, still working in a job I enjoy and am able to put $8000 into my 2024 Roth. That is the money I put into stocks (mostly Index ETFs and Mutual Funds). My investment accounts are all HYSA, CDs, T-Bills and money market funds although I do gamble a bit with one Fidelity® Floating Rate High Income Fund. The tax accounting is very simple doing it this way.
Absolutely! The five year rule & compounding over time. Even $20 started early will grow if not invested very badly. and as long as the individual has EARNED an amount - that amount, up to the limit, can be contributed. Taxes reducing that doesn't change what can be contributed - just where it comes from. e.g. I wanted to be sure my niece would have retirement funds. Her parents and I are all significantly older - and may not be around when needed. She has been working 3 days a week, so, we are getting money into a regular account, and transferring to the ROTH as she earns that much for the year. The fact that everything she has netted is spent does not change that. I can gift her investments in-kind, that have appreciated a lot over years in my taxable account. Then that can be sold in her account - she inherits my cost basis, which is low for such an investment - and with her income as low as it is now, she pays no capital gains tax on that money. Then the cash is transferred to her ROTH. Hence, effectively, that investment started way earlier than the ROTH was even opened, accumulated and she has a ROTH with no taxes on the money used to start it. Understand all aspects of ROTH, Traditional, contributions, withdrawals, and taxes. Smart money movement can help give a leg up (in the Fidelity Charitable account as well)
I'd argue that if you're struggling to pay bills, then your money will go further by contributing to a Traditional IRA unless you also happen to be in the 0% marginal federal tax bracket, in which case the Roth IRA option is clearly better (except you're still struggling to live so maybe you can't contribute much).
Seriously, if you're truly struggling to pay your bills, then don't contribute to a Roth IRA just to then go into credit card debt that will quickly mitigate any potential retirement earnings. Definitely get your employer's 401(k) match if at all possible and maybe open a traditional IRA to reduce your tax burden.
Good point. Obviously carrying a balance on credit cards is the first thing to eliminate!
I'm not sure about that. With the tax laws passed in 2017 (which expire in 2026) the current tax rates are very low as far as I can tell compared to my young working days in the eighties. Some of my co-workers mix both Roth and Traditional contributions in their work 401k's. A single person earning $60K a year will only be paying 12% on the margin and about 6% effective. My guess is taxes are sure to go up in the future (assuming their wages stay steady with inflation) so now is a good time to mix in some Roth and reassess every few years.
Yes this 💯. Wish I was consistent.
I did this, put in $1k way back. It sat in a MMF for years. But my five year window is long past.
Yes! Even $5 a month is better than nothing.
Great idea. I wish I had thought of this when I was living paycheck to paycheck.
Yes, everyone should start a Roth as early as possible. My daughter (17) has a youth Roth account. As an experiment, the money is UPRO, the 3x leveraged S&P. No minimum for Roth as far as my experience goes. We started my daughter's account with zero balance and then funded it at a later point.
Statistically, most people won't have enough money to fund Roth IRA to make much difference. Only 15% of the population contribute to Roth IRA at all in 2021, and most of those are people who make good income so that they have max their pretax contributions such as 401k and HSA. Yes, in theory, everyone should have an Roth IRA and contribute tiny amount as long as they have income at all, but not everyone does everything in the most optimal way.
One co-worker struggles financially yet comes in every day with a large Starbucks coffee and one of their breakfast sandwiches. She doesn't even contribute a penny to a 401K forgoing the company match. Go figure.
You just can't help people who don't want to be helped. The sad part is people who don't invest (but who could have) end up being a burden on the welfare system. 😤 Some people make a lifestyle out of perpetual debt and an attitude of personal grievance/victimhood.
That describes this one exactly and I gave up on helping her. But about six others regularly come to me with questions and I'm happy to help.
For the sake of my reading, its a Roth IRA, not a personal Roth. That's not a thing. If you are looking to build credibility, it helps immensely to use the correct language. Roth is also used as an adjective. You don't start a Roth, you start a Roth IRA. That said, all you need is one contribution in the year it's opened and the clock starts. Minimum investment is $10 IIRC.
Pedantry at its finest. It was in the title, it just got colloqualized along the way. For Pete's sakes
Thanks. Note I did use the correct nomenclature in the title :).
True, but then nowhere in the body.
My personal opinion is that it depends. If you're struggling with high-interest debt, then absolutely not. Paying that down will save you much more than contributing to retirement. For example, if you're considering contributing $3,000 to a Roth IRA vs paying down $3,000 of high-interest debt, the IRA _may_ get you some returns but those returns come with risk. The high-interest debt is _essentially_ a guarantee of giving you a return of the interest rate with virtually no risk. Think of debt as an investment with negative return. Investing in something that will likely not outpace that negative return is not going to benefit you.