Sooner or later, we’re all going to need to pick a retirement savings account. And if you’ve decided an IRA (individual retirement account) is right for you, you’ve got yet another choice to make: Should you open a Roth or traditional IRA?
As is the case every year, a New Year brings changes for retirement plan contributions and limits. Retirement plans, such as employer-sponsored plans and self-employed plans, can be affected. Some years bring more changes than others. So what’s new for 2019?
Everyone who enjoys paying taxes, raise your hand… Hmmm, no hands. Now, if you prefer having money to not having it, raise your hand. Yup, lots of hands in the air. Alas, having money and paying taxes tend to go… well… hand in hand. No one likes paying taxes, but not paying them tends to lead to very big problems, from an IRS audit to possible imprisonment. It’s not recommended.
Investing in and of itself can be a complicated endeavor. There are issues that you’ll need to address — what to invest in, what types of accounts are available to you and how much to invest in various types of vehicles such as stocks, bonds and cash. These decisions are all important parts of setting your investment strategy.
Retirement savings are a long-term game. Most of us start saving about three decades before we ever touch the money. Consistently saving and investing your money is the best way to grow your wealth and achieve a comfortable retirement. But you might not know how much you should have in your IRA at different ages. And hey, it’s tricky to figure that out. That’s why I’m here to help today.
The Roth IRA is my favorite retirement vehicle. And I’m not alone in this sentiment — according to Investment Company Institute data, about one-third of all IRA investors have a Roth. And research from Fidelity Investments suggests Millennials and baby boomers alike are wholeheartedly embracing these savings accounts, contributing more money on an average annual basis into Roths than into traditional IRAs.
I distinctly remember the first adult conversation I had about getting started with investing. I was 25, making about $18,000 a year and still carrying tens of thousands of dollars in student loan debt. One of my former college roommates and I were walking around New York City talking about the new life stage we were in. We were two years out of college, feeling caught between childhood and adulthood.
We all know about Individual Retirement Accounts (IRAs) created by the US government. These savings tools can help you grow your nest egg and enjoy a break at tax time too. But there’s a special kind of IRA known as the Roth IRA. Although with Roth accounts you have to pay taxes upfront, in the long run, they can save you a bundle.
Most of us have a retirement account — either an IRA or a qualified employer plan like a 401(k) or 403(b). These plans provide easy access to traditional investment choices like stocks, bonds and cash. But what about gold? What about real estate? What if you don’t want to bank your retirement on the stock market because you’re uncomfortable investing in what you don’t understand — or because you’re just plain wary of bull and bear cycles? Can’t you choose to invest your retirement money in other things?