| Young couple seeking retirement advice (IRA, 401k) |
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bestcoast
Member
Cash: $ 3.85
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Joined: 27 Dec 2005
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| Young couple seeking retirement advice (IRA, 401k) |
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Hello,
My fiancee and I are both in our early 20s. We are trying to coordinate our retirement plans and seeking advice.
I have about $10k in stocks and am considering starting a Roth IRA. I do not have a 401k at this point, but will probably have one at this time next year. Just graduated from college last week.
She has two separate 401ks, spread about $4,000 in each. They can be merged at some point next year. She will likely go back to school for two more years once we are married (in early April). She does not have an IRA.
I am very uncertain as to which would be best for us. A joint IRA? Focus on 401ks? Do both? Separate IRAs? Should I start a Roth IRA before the April 15 deadline? We will be married before that deadline, if that makes any difference.
One thing I know for sure is that I would like to have complete control over my retirement portfolio. I am a persistent trader/investor, so I want to make sure my retirement plan has the flexibility to trade stocks.
Any help or suggestions would be appreciated. Thank you in advance!
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Tue Dec 27, 2005 9:24 pm |
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auggyf
Full Member
Cash: $ 19.90
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Joined: 24 Sep 2005
Location: San Francisco
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| Re: Young couple seeking retirement advice (IRA, 401k) |
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I cannot comment on joint/separate accounts as I don't know much about it.
I would recommend that you open up a Roth IRA for 2005 if you qualify and have the available cash for it. You can choose what brokerage firm to hold your 401K account, and most of them allow for you to select investments as you wish.
Another thing to consider for your fiancee is that while she is in school, it is a great time to rollover her 401Ks into Roth IRAs (the sequence is from 401K to IRA to Roth IRA). The reason is that she will owe income tax on that money at the time of the rollover, which presumably is low since she is a student.
As for a 401K vs a Roth IRA, this is somewhat of a complex question, but it is a good idea to take advantage of employer matching in a 401K and also take advantage of some of the flexibilities and tax differences in the Roth IRA. So I would recommend ... both if possible. To add to the complexity, many employers will start to offer Roth 401Ks in 2006. This is yet another choice in the retirement bundles that we need to choose from. Rules will be similar to the 401K, except tax-wise it is similar to a Roth IRA (put in after-tax, withdraw tax free @ retirement).
As much as I think choices are good, I think this is getting a bit ridiculous. I personally am having a hard time deciding between the Roth 401K and regular 401K, as it's making you compare your income tax rate now to your income tax rate whenever you retire. One slight advantage of a Roth 401k over a regular 401k is that you end up putting more money into a retirement account with the Roth 401k ... the limit in 2006 is $15k either way, so $15K after tax is more overall money than $15K pre-tax. But I'm digressing...
Also keep in mind that the Roth IRA (and any deductible IRA) has an income limit, somewhere in the low $100ks I believe (if single). Since you are getting married, you need to figure out how you are going to file your taxes as well. Consult a tax advisor, I am not one. If you feel that you may not quality in the future, it might be nice to take advantage of this while you can.
Good luck, and congratulations on the graduation + marriage.
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Tue Dec 27, 2005 10:16 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
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Location: Colorado/Florida
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| Re: Young couple seeking retirement advice (IRA, 401k) |
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quote:
Originally posted by bestcoast
I have about $10k in stocks and am considering starting a Roth IRA.
Why don't you have one already?
quote:
Originally posted by bestcoast
I am very uncertain as to which would be best for us. A joint IRA?
No such thing; the "I" in "IRA" stands for "INDIVIDUAL". 
You can each have your own IRA, which doubles the $ for tax breaks.
quote:
Originally posted by bestcoast
Should I start a Roth IRA before the April 15 deadline? We will be married before that deadline, if that makes any difference.
Yes. And see below.
quote:
Originally posted by bestcoast
One thing I know for sure is that I would like to have complete control over my retirement portfolio. I am a persistent trader/investor, so I want to make sure my retirement plan has the flexibility to trade stocks.
Your retirement plan is not limited to tax-advantaged accounts; you can trade stocks in an IRA and you can open a regular brokerage account, after your tax-advantaged accounts are funded, of course.
quote:
Originally posted by coaster
I'd suggest separate accounts. At this point I'm sure you're thinking "till death do us part" but let's face it, 50% don't these days.
Get a pre-nup and reinforce it with a post-nup after a year. The last thought you want is, "Gee...a hitman is cheaper than losing half of my investments!"
"Expect me when you see me."
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Wed Dec 28, 2005 2:53 am |
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bestcoast
Member
Cash: $ 3.85
Posts: 18
Joined: 27 Dec 2005
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| Re: Young couple seeking retirement advice (IRA, 401k) |
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quote:
Originally posted by Rolo
Why don't you have one already?
I've always wanted to do it... I guess the confusion just turned me off from actually doing it.
quote:
Originally posted by Rolo
No such thing; the "I" in "IRA" stands for "INDIVIDUAL".
You can each have your own IRA, which doubles the $ for tax breaks.
I didn't realize this. Oops.  Do you think it is worth using two IRAs or maxing out one IRA? We'll probably also have 401ks. Can we just put both of our incomes into one IRA?
quote:
Originally posted by Rolo
Your retirement plan is not limited to tax-advantaged accounts; you can trade stocks in an IRA and you can open a regular brokerage account, after your tax-advantaged accounts are funded, of course.
I guess I'm still a little confused. I am already with Charles Schwab (they seem to be improving...), and I will probably do my Roth IRA with them. So, you recommend maxing out the IRA each year? Do I have 100 percent control of where that money is invested? Can I throw all my IRA money into Google stock (hypothetical -- it would be stupid, I know) if I wanted to?
If that is the case, I should have invested all my money into an IRA a long time ago and been working within my IRA for the past 7 years.
Which begs another question: If I'm not mistaken, I can put a maximum of $3,000 in to an IRA this year. Can I just transfer that from my current Schwab accounts into the IRA?
quote:
Originally posted by Rolo
quote:
Originally posted by coaster
I'd suggest separate accounts. At this point I'm sure you're thinking "till death do us part" but let's face it, 50% don't these days.
Get a pre-nup and reinforce it with a post-nup after a year. The last thought you want is, "Gee...a hitman is cheaper than losing half of my investments!"
I doubt we'll get a pre-nup. We both have near identical backgrounds in savings. We will probably have similar salaries in the future. We both think the idea of a pre-nup is just begging for a divorce.
Thank you so much for the help. It is truly appreciated to get some advice. I sometimes feel really lost in all this and don't want to screw myself over in the long run. Sorry if some of my questions seem stupid.
Thanks again!
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Wed Dec 28, 2005 3:26 am |
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bestcoast
Member
Cash: $ 3.85
Posts: 18
Joined: 27 Dec 2005
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| Re: Young couple seeking retirement advice (IRA, 401k) |
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quote:
Originally posted by auggyf
Another thing to consider for your fiancee is that while she is in school, it is a great time to rollover her 401Ks into Roth IRAs (the sequence is from 401K to IRA to Roth IRA). The reason is that she will owe income tax on that money at the time of the rollover, which presumably is low since she is a student..
This is a great tip. Thanks for the advice!
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Wed Dec 28, 2005 3:30 am |
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debtfree4life
New Member
Cash: $ 1.05
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Joined: 30 Dec 2005
Location: New Jersey
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| Losing money |
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YOU DON'T HAVE A 401K? Amazing did you know that a 401k lowers your tax burden for that tax year. Plus the Goverment just raised the 10% bracket to include more people.
My suggestion Enroll in your jobs 401k A.S.A.P Dedicate as much money as you can. check to see if your employer matches. At minimum put in what they match. Next open an ira for yourself and dedicate 10% of your after tax pay to it (the government lets you have a tax break for up to 50% of 2k that you put in.
Of course your income determines how much they match. so try to max out your 401k.
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Fri Dec 30, 2005 6:32 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida
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| Re: Young couple seeking retirement advice (IRA, 401k) |
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quote:
Originally posted by auggyf
Another thing to consider for your fiancee is that while she is in school, it is a great time to rollover her 401Ks into Roth IRAs (the sequence is from 401K to IRA to Roth IRA). The reason is that she will owe income tax on that money at the time of the rollover, which presumably is low since she is a student..
Why convert to a Roth at all? What advantage could possibly be worth the tax ding?
"Expect me when you see me."
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Sat Dec 31, 2005 1:33 am |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida
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| Re: Young couple seeking retirement advice (IRA, 401k) |
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quote:
Originally posted by bestcoast
Do you think it is worth using two IRAs or maxing out one IRA? We'll probably also have 401ks. Can we just put both of our incomes into one IRA?
After you max your 401k, if you can max out BOTH IRA's ($4K times two), then do so. If you can ONLY fund $4K, then fund one IRA (yours, since you won't have a pre-nup...hehe); it is better (and easier) to have your money as contiguous as possible. Live BELOW your means to fund it all, if not impossible.
quote:
Originally posted by bestcoast
I am already with Charles Schwab (they seem to be improving...),
Chuck sucks. Go elsewhere. Pay NO fees whatsoever; they make their money off of commissions. I have never, ever paid a damned fee in anything. (except one night a few years ago, drunk in a club, at an ATM, heh.)
Personally, I am with Scottrade and yes, I can buy stocks, funds, bonds, and probably some other stuff I don't know about--full control, no fees, great customer service with local offices everywhere. They're even cool about margin calls.
quote:
Originally posted by bestcoast
If that is the case, I should have invested all my money into an IRA a long time ago and been working within my IRA for the past 7 years.
Yes. Be glad you learned it now rather than in another 7 years (or never).
quote:
Originally posted by bestcoast
Can I just transfer that from my current Schwab accounts into the IRA?
Only up to the $4K max per year. You have until April 15th, 2006 to fund 2005's IRA, so you can dump $8K into yours and $8K into hers. They up the limits every few years; $5K in 2007 or 8...ah, Goooooogle it.
quote:
Originally posted by bestcoast
I doubt we'll get a pre-nup. We both have near identical backgrounds in savings. We will probably have similar salaries in the future. We both think the idea of a pre-nup is just begging for a divorce.
Do you have insurance? Like, home/renters, auto, life? Think of it as money insurance. Fact: most divorces are filed by women. Willie Shakey put it best: "Hell hath no fury like that of a woman scorned."
My wife likes the idea of a pre-nup because it removes the possibility of "leave and take half"and therefore will not be distracted by it, leaving working on the betterment of the marriage as the only option. i.e. no safety net.
"Expect me when you see me."
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Sat Dec 31, 2005 1:51 am |
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