Wednesday, January 18, 2006

Roth IRA

Over the past several months I have been reading other personal finance blogs and many proclaim the benefits of the Roth IRA. The tax-free growth and the ability to withdraw contributions penalty free are just two such benefits. In the past, I was always comfortable simply allocating as much as I could afford to my 401k account. I have done some thinking and reading and now feel that is likely not the most tax effective strategy for someone my age and with my income. Going forward, I am going to continue to contribute 8% of my salary to my 401k; therefore insuring that I continue to receive the full company match. The extra 2% I was contributing to my 401k will now be invested in a Roth IRA. I will end up contributing the same amount towards my retirement in total just in a little different way. Since I currently do not have a Roth IRA established, I will be researching the various brokers, likely just Fidelity and Vanguard, and establishing an account at the one that is better suited for me.

2 comments:

Anonymous said...

Something that I'm thinking a lot about these days is a non-ira acct. I put about 20% in my 401k each month, and also contribute to a ROTH. The problem is that I want to stop working before I can start drawing on my IRA's. That means I've got to come up with some cash to live on while I wait to hit the magic retirement number. Just something to think about. Great blog!
Hazzard

CoolBreeze said...

Hazzard -

You bring up a good point. I am hoping in the next five years or so that I will be in a position to have extra cash to fund an account outside of my 401k and IRAs.

Thanks for the comment.