That’s a really good idea!
Imo, Roth is better because you can pull money out. So it doubles as a savings account. That was particularly useful in my pre-actuary days, when I didn’t have much to blow.
Aside from that I hope to retire poor, so traditional makes more sense.
Assuming rates being equal and you only have either roth or traditional at retirement, wouldn’t traditional win?
When you withdrawal a traditional contribution in retirement you “fill-up” the lower marginal tax rates and thereby pay lower taxes than the roth which was taxed at the marginal rate.
Traditional would be taxed at effective rate and roth taxes at the higher marginal.
Yes, I think most people want some of both.
If your income in retirement will be lower than your taxable income while you work then 100% Traditional would make sense though.
That said, tax rates are also very low right now. IMO there’s something to be said for getting the income taxed now while the rates are low.
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That is my take. Taxes are historically low and unlikely to get lower, and I’m not in my higher-earning near-retirement years. Roth now, I’ll transition to Traditional in the future.
I put as much as I can in Roth. So much so that I make post-tax contributions to traditional, and then immediately convert to Roth at the end of the year each year. (“backdoor Roth”).
Update: I called Vanguard to get their take. I am going to take a $0.07 distribution. They are mailing me a check and cautioned that I do need to cash it or the $0.07 will find its way back to my account.
This distribution is subject to state and federal income taxes, as well as a 10% penalty. They will issue a 1099 at the end of the year.
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Having the Roth makes sense to me if I want to retire early, since capital gains are not taxed and contributions can be withdrawn with no penalty prior to 59.5. Currently targeting 57 based on an abundance of other factors.
some of u really are betting on living to retirement
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My retirement funds will provide for others even if I don’t.
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yup, it’s my life insurance policy for my family
How hard is it to set up a Roth account? Is it just like click stuff on Schwab and voila?
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Yep. You need to check income limits to make sure you are eligible to contribute directly, but it is just click and open in general.
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Nah, I’m probably going to die. Just leaving money for my partner. That means I’m poor ofc by your , but I can deal with that.
Has been a while but it was easy. Maybe I needed a minimum amount? But if so, not anything crazy like $10k.
Of course, was just saying there was no minimum that most of us would struggle with. Probably irrelevant to have added that given the audience.
Max annual direct contribution is $6k, so certainly not.
No IRS or Schwab minimum. Other institutions might.
Maybe I’m wrong, but I believe the traditional ira part must then be held by them until their retirement age or else they’ll have to pay penalties…can’t remember the rules for the roth.
edit: I think I’m wrong.
good to know. I thought there’d be a catch like that. Luckily i have other life insurance to hold them over
Maybe I’m wrong, but I believe the traditional ira part must then be held by them until their retirement age or else they’ll have to pay penalties…can’t remember the rules for the roth
Payments after death are not subject to the 10% early penalty, regardless of the participant/IRA holder or beneficiary’s age. And in most cases must now be paid out within 10 years following death thanks to the SECURE Act.
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I wonder wth I was reading a few months ago. Anyway, here’s one source.
from earlier in the article…
Vanguard has a $10 transaction minimum, I’ve recently learned.
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