What Roth IRA have you had a good experience with?

[stuckmotor]

About all I know what to do with money is spend it.
Now I've got to start taking disbursements from an IRA that I've had since the 1980's and my wife says there are tax advantages in a Roth IRA to stash in it in, with an eye toward taking some out periodically or leaving it to her or our son. Can someone who's had a good experience with one please direct me to it.

 

[KennyG]

If you are taking required minimum distributions from a traditional IRA, realize you can only contribute to a Roth IRA if you are working and have income. If that is the case, the Roth would let you accumulate gains tax free but you the money you put into it must be earned income that has been taxed.

If that's your situation and this is a long term investment, I would always recommend an S&P 500 index fund like the ones from Vanguard or Fidelity.

 

[DarkBlack]

What he said. Legally you can only contribute to a roth if you or your wife are still employed.

 

[KennyG]

One minor clarification that doesn't apply to most people - if you have some money in a traditional IRA that was put in after tax instead of before tax, it can be converted to a Roth IRA. In my case, I sometimes contributed to my traditional IRA with after tax money because I put in more than I was allowed to contribute before taxes. When the Roth came into existence, I took the after tax contributions out of the traditional IRA and moved it to a Roth. You have to have the records to show this but it saves money on taxes.

Most people don't have this situation, but I thought I'd mention it. (If you move before tax contributions from a traditional to a Roth IRA you have to pay the taxes at that time. That usually doesn't make economic sense.)

 

[DarkBlack]

One minor clarification that doesn't apply to most people - if you have some money in a traditional IRA that was put in after tax instead of before tax, it can be converted to a Roth IRA. In my case, I sometimes contributed to my traditional IRA with after tax money because I put in more than I was allowed to contribute before taxes. When the Roth came into existence, I took the after tax contributions out of the traditional IRA and moved it to a Roth. You have to have the records to show this but it saves money on taxes.

Most people don't have this situation, but I thought I'd mention it. (If you move before tax contributions from a traditional to a Roth IRA you have to pay the taxes at that time. That usually doesn't make economic sense.)

But your conversation was a taxable event that year at the $ level moved, when you executed it.

 

[KennyG]

But your conversation was a taxable event that year at the $ level moved, when you executed it.

No, I only moved the original after tax contribution so there was no tax liability.

 

[DarkBlack]

No, I only moved the original after tax contribution so there was no tax liability.

Ok, so you must have left behind your gains in the traditional IRA, or paid taxes that year on the gains, to completely convert.
You’re right, That is, an unusual situation.

 

[caver]

Old former co-worker invested in a Fruit Jar IRA. Put your money in fruit jars and bury them.

 

[JasperFrank]

KennyG- "I would always recommend an S&P 500 index fund like the ones from Vanguard or Fidelity." I agree.

 

[CloverKnollFarms]

We have a couple ROTH IRAs with Vanguard, and a ROTH 401k at Schwab.

It's probably more important what YOU do with it once it's moved, than where it's moved to. No matter where we have had our money, it's always outperformed the broad market

 

[stuckmotor]

Guys
Thank you for straightening me out. It appears that my wife was just plain wrong.

We've been married fifty years and we're both slowing down. I've looked at Schwab and got lost in the details. I'll check out the other two that were recommended and if one is smart enough to dumb it down so I know what they're talking about, I might invest with them. If not, there's always the fruit jar plan.

 

[CloverKnollFarms]

Vanguard has the VOO ETF, which IMHO is a rock star.

 

[kenmac]

Vanguard has the VOO ETF, which IMHO is a rock star.

I like the Fidelity FXAIX fund as well

 

[newbury]

If you are the type that loses sleep over worrying about the market look at bogleheads, or start by dumping it into T-bills through the Treasury. Still better than fruit jars.

 

[duffer]

One other important factor I haven't seen mentioned so far, is that whatever money you put into a Roth, it must remain there for 5 years, before you enjoy the tax free withdrawals. Otherwise you pay tax on any withdrawal.

Just FYI.

 

[Richard]

One other important factor I haven't seen mentioned so far, is that whatever money you put into a Roth, it must remain there for 5 years, before you enjoy the tax free withdrawals. Otherwise you pay tax on any withdrawal.

I was going to make a comment on prior page, figured I'd best read to end to see if someone mentioned this, you did so thanks!

As has been said:

1. To contribute to a Roth, you or spouse must have earned income. (any chance you part time as a walmart door greeter?!!!) It doesn't have to be a full time job. If you did work part time, you can put the lessor of what you make or the annual limits.
2. If you convert, you can do so but, it has to sit for 5-years before it's tax free to you.
3. Something I've rarely heard mentioned..... when you are subject to Medicare premiums, they are based on your taxable income. When you start pulling funds out for RMD's for example, that's going to raise your income and perhaps raise your premium amounts. If those funds had been worked into a Roth account, they won't raise your income when you take a distribution (which you are never "required" to do.

I'm a fan of the Roth account. Many 401K's and now, some 457 accounts, allow for after tax (Roth) contributions and the limits are significantly higher than what the IRA allows.

 

[KennyG]

3. Something I've rarely heard mentioned..... when you are subject to Medicare premiums, they are based on your taxable income. When you start pulling funds out for RMD's for example, that's going to raise your income and perhaps raise your premium amounts. If those funds had been worked into a Roth account, they won't raise your income when you take a distribution (which you are never "required" to do.

That's true. It's nice to have money and my IRA/401K investments have been extremely successful. I also max out on Social Security payments because I always made more than the limit and didn't take SS until I had to at 70. However, it means I pay tax on my SS and have increased Medicare premiums. I didn't pay attention to the larger than expected investment returns last year and didn't adjust my estimated tax payments up enough, so now I have to write a check to the IRS for about $13,000 this year. It was simpler when I was just working for a living.

I did most of my saving before the Roth existed, but I tell my kids to go that route.

 

[Lineman North Florida]

One other important factor I haven't seen mentioned so far, is that whatever money you put into a Roth, it must remain there for 5 years, before you enjoy the tax free withdrawals. Otherwise you pay tax on any withdrawal.

Just FYI.

It's always been my understanding that only the interest earned on your money that you invested in the Roth is what must remain in the account for 5 years to be tax free as the money that you initially invested has already been taxed when you put it in the account.

 

[duffer]

It's always been my understanding that only the interest earned on your money that you invested in the Roth is what must remain in the account for 5 years to be tax free as the money that you initially invested has already been taxed when you put it in the account.

I should have been more clear. You're right, it would be taxed on any gain/interest. And all of it would be at ordinary income rates, not cap gains.

Thanx for clarifying.

 

[D&D]

Guys
Thank you for straightening me out. It appears that my wife was just plain wrong.

We've been married fifty years and we're both slowing down. I've looked at Schwab and got lost in the details. I'll check out the other two that were recommended and if one is smart enough to dumb it down so I know what they're talking about, I might invest with them. If not, there's always the fruit jar plan.

Have you tried calling Schwab, Vanguard, etc.? Personally, I picked Vanguard and have never had a problem getting very direct answers to my questions.