Roth IRA

12 Replies

This depends on what you think will happen with taxes in the future. If you think that they will rise, then a Roth IRA would be your best choice because you pay taxes as you put money into it. If you think that taxes will go down, then go for a non Roth IRA and you will pay taxes on your money when you take it out in the future. Also, if you have a traditional IRA right now, you could convert it into a Roth IRA and pay the taxes on the money right now. Personally, I feel that taxes will go up in the future, so I prefer a Roth IRA to a traditional IRA. If you are interested in learning more about this type of stuff, check out "Money: Master the Game" by Tony Robbins. It is a long book, but it is enjoyable to read Tony's work and I have learned so much already from only reading half of the book. I hope this was helpful.

@Sean Dulcio

That is an entirely open ended question with no specific answer.

A Roth IRA is a very powerful tax vehicle that can be used to create significant tax-free wealth.

When you put money in, you are taxed at your regular income rate on the contributed amount.  There is no tax-deferral as with other conventional retirement plans.

However, all future growth through investment returns, and any distributions you take from the account in retirement are tax free.

The following calculator would compare the difference in net post-tax income to you by comparing into a tax-deferred "traditional" IRA or a Roth IRA.

http://dinkytown.net/java/RothvsRegular.html

The other piece is that the IRA in and of itself is not really a good or bad investment. The investments you make with the IRA will determine the beneficial impact.

A Roth IRA may be invested in traditional stocks, etc, or be configured as a self directed IRA with the potential to invest in non-traditional assets such as real estate, notes, tax-liens, etc (in addition to stocks). The higher your return on investment, the more beneficial the Roth tax structure becomes as compared to a traditional IRA or after-tax investments.

Research and consultations with a (preferably fee based) financial planner and tax advisor such as a CPA will be the best way for you to learn about how you can best configure your situation into an investment strategy that will produce beneficial long term results.

Originally posted by @Zack Broaddus :

This depends on what you think will happen with taxes in the future. If you think that they will rise, then a Roth IRA would be your best choice because you pay taxes as you put money into it. If you think that taxes will go down, then go for a non Roth IRA and you will pay taxes on your money when you take it out in the future. Also, if you have a traditional IRA right now, you could convert it into a Roth IRA and pay the taxes on the money right now. Personally, I feel that taxes will go up in the future, so I prefer a Roth IRA to a traditional IRA. If you are interested in learning more about this type of stuff, check out "Money: Master the Game" by Tony Robbins. It is a long book, but it is enjoyable to read Tony's work and I have learned so much already from only reading half of the book. I hope this was helpful.

 Thanks for your input Zack, really appreciate. What exactly are the steps to creating one ? 

Originally posted by @Brian Eastman :

@Sean Dulcio

That is an entirely open ended question with no specific answer.

A Roth IRA is a very powerful tax vehicle that can be used to create significant tax-free wealth.

When you put money in, you are taxed at your regular income rate on the contributed amount.  There is no tax-deferral as with other conventional retirement plans.

However, all future growth through investment returns, and any distributions you take from the account in retirement are tax free.

The following calculator would compare the difference in net post-tax income to you by comparing into a tax-deferred "traditional" IRA or a Roth IRA.

http://dinkytown.net/java/RothvsRegular.html

The other piece is that the IRA in and of itself is not really a good or bad investment. The investments you make with the IRA will determine the beneficial impact.

A Roth IRA may be invested in traditional stocks, etc, or be configured as a self directed IRA with the potential to invest in non-traditional assets such as real estate, notes, tax-liens, etc (in addition to stocks). The higher your return on investment, the more beneficial the Roth tax structure becomes as compared to a traditional IRA or after-tax investments.

Research and consultations with a (preferably fee based) financial planner and tax advisor such as a CPA will be the best way for you to learn about how you can best configure your situation into an investment strategy that will produce beneficial long term results.

Thanks Brian, the information you provided me was a big help. I need to get some more information on the IRA before I take any action.

Originally posted by @Sean Dulcio :

is a Roth IRA a good investment ?

Sean, a Roth IRA in itself is not an investment - it is a Qualified Retirement Account. Once you make a contribution to your Roth IRA then you can choose where to invest those funds. Conventional Roth IRA allows you to invest only in stocks and mutual funds. Self-directed account allows for non-traditional investments such as real estate and trust deeds. Hopefully those posts above shed some light for you.

Originally posted by @Dmitriy Fomichenko :
Originally posted by @Sean Dulcio:

is a Roth IRA a good investment ?

Sean, a Roth IRA in itself is not an investment - it is a Qualified Retirement Account. Once you make a contribution to your Roth IRA then you can choose where to invest those funds. Conventional Roth IRA allows you to invest only in stocks and mutual funds. Self-directed account allows for non-traditional investments such as real estate and trust deeds. Hopefully those posts above shed some light for you.

 Thanks Dmitriy, I appreciate the fact you broke down the concept for me. As young as I am i just searching for the proper investments to invest in. Also which are the best assets to acquire.

@Sean Dulcio

In my opinion the Roth IRA is the next best thing since sliced bread. Yes it is always advantageous to open a Roth IRA--the sooner the better. Unlike Traditional IRAs where contributions are made with pretax funds and then taxed along with the earnings once distributions commence (usually are retirement age or at age 70 1/2), Roth IRAs, on the other hand, are funded with after tax money but the gains grow tax free.

Therefore, the sooner you fund a Roth IRA the more time you will have for it grow tax free. There are many more perks to a Roth IRA but here just a few more.

1. Roth IRA contributions can be withdrawn anytime tax free so it often serves as a great emergency savings vehicle in addition to a retirement account.

2. A Roth IRA is not subject to required minimum distributions (age 70 1/2).

3. A Roth IRA can be self-directed into alternative investments such as real estate, precious metals, notes, tax liens, private shares, etc.

Lastly, you may also want to explore the self-directed Roth Solo 401k as it allows the business owner to take a personal loan, which is not allowed in a Roth IRA.

Originally posted by @Mark Nolan :

@Sean Dulcio

In my opinion the Roth IRA is the next best thing since sliced bread. Yes it is always advantageous to open a Roth IRA--the sooner the better. Unlike Traditional IRAs where contributions are made with pretax funds and then taxed along with the earnings once distributions commence (usually are retirement age or at age 70 1/2), Roth IRAs, on the other hand, are funded with after tax money but the gains grow tax free.

Therefore, the sooner you fund a Roth IRA the more time you will have for it grow tax free. There are many more perks to a Roth IRA but here just a few more.

1. Roth IRA contributions can be withdrawn anytime tax free so it often serves as a great emergency savings vehicle in addition to a retirement account.

2. A Roth IRA is not subject to required minimum distributions (age 70 1/2).

3. A Roth IRA can be self-directed into alternative investments such as real estate, precious metals, notes, tax liens, private shares, etc.

Lastly, you may also want to explore the self-directed Roth Solo 401k as it allows the business owner to take a personal loan, which is not allowed in a Roth IRA.

 Thanks Mark, I find this information really helpful also an eye opener.

If you're in a 15% or lower tax bracket, holding an investment in a Roth is vastly superior to holding the same investment elsewhere. As you tax bracket rises, the benefits tend to drop off, or at least it comes closer to a wash compared to taking the tax deduction now and investing the difference with a traditional IRA. This all presupposes that taxes aren't going to change too much between now and whenever you turn 59 and 1/2. Anyway, if you won't touch the money until traditional retirement age, either IRA option beats holding the same investment in a taxable form.

You'll want to find a company that specializes in this sort of thing, like Vanguard or Fidelity. You need access to decent investments that you likely won't get if you let your bank set up your IRA. They work best with low cost index funds, rather than expensive mutual funds or low-yield debt instruments (CDs and such). www.bogleheads.org is a good starting point.

Going self-directed and putting real estate or whatever in is also an option, but I don't have any experience with that.

Originally posted by @Sean Dulcio :
Originally posted by @Dmitriy Fomichenko:
Originally posted by @Sean Dulcio:

is a Roth IRA a good investment ?

Sean, a Roth IRA in itself is not an investment - it is a Qualified Retirement Account. Once you make a contribution to your Roth IRA then you can choose where to invest those funds. Conventional Roth IRA allows you to invest only in stocks and mutual funds. Self-directed account allows for non-traditional investments such as real estate and trust deeds. Hopefully those posts above shed some light for you.

 Thanks Dmitriy, I appreciate the fact you broke down the concept for me. As young as I am i just searching for the proper investments to invest in. Also which are the best assets to acquire.

Sean, the best investment for someone else might not be the best investment for you. You can call me so that I can learn a little more about you and then would be able to give you some recommendation, based on YOUR situation. 

Originally posted by @Dmitriy Fomichenko :
Originally posted by @Sean Dulcio:
Originally posted by @Dmitriy Fomichenko:
Originally posted by @Sean Dulcio:

is a Roth IRA a good investment ?

Sean, a Roth IRA in itself is not an investment - it is a Qualified Retirement Account. Once you make a contribution to your Roth IRA then you can choose where to invest those funds. Conventional Roth IRA allows you to invest only in stocks and mutual funds. Self-directed account allows for non-traditional investments such as real estate and trust deeds. Hopefully those posts above shed some light for you.

 Thanks Dmitriy, I appreciate the fact you broke down the concept for me. As young as I am i just searching for the proper investments to invest in. Also which are the best assets to acquire.

Sean, the best investment for someone else might not be the best investment for you. You can call me so that I can learn a little more about you and then would be able to give you some recommendation, based on YOUR situation. 

 I will for sure, when is the best time for you ?

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