Roth IRA in Ankeny area

[Cyked15]

Looking at potentially moving 401k over to Roth IRA, I am a young professional and haven't accumulated much of a 401k yet, I feel like I would be better off in a Roth IRA. Any suggestions for who would be good to discuss my options in the Ankeny area?

Thanks for any suggestions.

 

[LivntheCyLife]

Looking at potentially moving 401k over to Roth IRA, I am a young professional and haven't accumulated much of a 401k yet, I feel like I would be better off in a Roth IRA. Any suggestions for who would be good to discuss my options in the Ankeny area?

Thanks for any suggestions.

Personally, I think you can get all the information you need from internet sites like:
www.bogleheads.org (I'd recommend starting out in the Getting started section and the wiki, and then venturing to the forums to post a question)

Then I'd open up a Roth IRA with one of the large providers on the internet like Vanguard or Fidelity. It's important that you pay attention to fees as they can take a big chunk out of your return.

Also based on your question, it's important that you understand the tax implications that would occur for transferring from a 401k (not taxed going in but taxed coming out of the account) to a Roth account (taxed going in but not coming out).

 

[Cyched]

Personally, I think you can get all the information you need from internet sites like:
www.bogleheads.org (I'd recommend starting out in the Getting started section and the wiki, and then venturing to the forums to post a question)

Then I'd open up a Roth IRA with one of the large providers on the internet like Vanguard or Fidelity. It's important that you pay attention to fees as they can take a big chunk out of your return.

Also based on your question, it's important that you understand the tax implications that would occur for transferring from a 401k (not taxed going in but taxed coming out of the account) to a Roth account (taxed going on but not coming out).

Pretty much this. Ultimately you have to decide what's best for you, but setting a Roth up online has never been easier. I have one through Vanguard and have been very pleased.

That being said, you may want to meet with a professional to guide you through the taxes involved with what you want to do so you don't get in trouble.

 

[SCNCY]

If you moved to a new job, you may want to look at the services that your new 401k offer. When I moved jobs, my company uses Fidelity for their 401k services, so I just went with them for my IRA.

I currently have my IRA still in a transition phase and have not elected to do a traditional or Roth yet. I just did my taxes for the 2016 year and think my tax rate is low enough so that itd make sense. I might still talk to a tax expert though.

 

[CtownCyclone]

Just curious as to why you think a Roth IRA would be better for you vs. a 401(k)?

401(k) has no upper income limits, a higher amount you can contribute per year ($18,000 vs $5,500), and most likely has an employer match.

 

[Cyched]

Looking at potentially moving 401k over to Roth IRA, I am a young professional and haven't accumulated much of a 401k yet, I feel like I would be better off in a Roth IRA. Any suggestions for who would be good to discuss my options in the Ankeny area?

Thanks for any suggestions.

Does your company offer a 401(k)? If so, are you contributing to it?

If not, that should be your first step. Contribute enough to get your company match and then look at opening a Roth

 

[SCNCY]

Just curious as to why you think a Roth IRA would be better for you vs. a 401(k)?

401(k) has no upper income limits, a higher amount you can contribute per year ($18,000 vs $5,500), and most likely has an employer match.

Unless I am missing something, the options of selecting investments in an IRA is better than the options you have in a 401k. Also, IRA accounts should be cost free, except the cost of your investments that you put in them. A 401K has service/booking fees and such on top of the fees that each fund has.

 

[SCNCY]

Another thing too, from what I have researched, that investing in to a Roth makes sense only if your tax rate today is lower than what you anticipate your tax rate to be during retirement. This is hard to figure out. But you could be paying higher taxes today as opposed to when you retire, which makes it less attractive than investing in to a traditional IRA.

 

[crash_zone]

Another thing too, from what I have researched, that investing in to a Roth makes sense only if your tax rate today is lower than what you anticipate your tax rate to be during retirement. This is hard to figure out. But you could be paying higher taxes today as opposed to when you retire, which makes it less attractive than investing in to a traditional IRA.

Not exactly true. If you are young - having all the growth being tax free more than makes up for paying more in taxes up front. Mix things up between taxed, Roth, and traditional accounts in order to have flexibility in retirement.

 

[Cyked15]

A little background on why I'm looking to move from 401k to Roth- a few months back I switched companies from one that offered 401k match to essentially being an independent contractor for a company not based in the United States.

From the (very little) I remember from college and a little research, it seems a Roth IRA is better for my situation.

 

[CtownCyclone]

A little background on why I'm looking to move from 401k to Roth- a few months back I switched companies from one that offered 401k match to essentially being an independent contractor for a company not based in the United States.

From the (very little) I remember from college and a little research, it seems a Roth IRA is better for my situation.

So you really need a money guy (or gal) to help you figure out what you really need to be doing is what it sounds like.

I did that a year or two ago and it was definitely a good thing to have somebody take an objective look at what we were doing and where we wanted to be and get us pointed in the right direction.

 

[BCClone]

A little background on why I'm looking to move from 401k to Roth- a few months back I switched companies from one that offered 401k match to essentially being an independent contractor for a company not based in the United States.

From the (very little) I remember from college and a little research, it seems a Roth IRA is better for my situation.

You have traditional ira and Roth IRA. (Also a SEP, but the less of these imo). Tap out the Roth first, get you wife to do hers and then look at traditional.

 

[Cyked15]

You have traditional ira and Roth IRA. (Also a SEP, but the less of these imo). Tap out the Roth first, get you wife to do hers and then look at traditional.

No wife or kids at the moment, trying to make sure these kind of things and student loans are under control before I get myself incurring those expenses.

 

[JY07]

Unless I am missing something, the options of selecting investments in an IRA is better than the options you have in a 401k. Also, IRA accounts should be cost free, except the cost of your investments that you put in them. A 401K has service/booking fees and such on top of the fees that each fund has.

QFE: unless you're in a situation where your employer is contributing a decent amount to your 401k (and you're contributing more than $5,500 / year), you're likely to be better off with an IRA over a 401k.

 

[MartyMcCy]

Looking at potentially moving 401k over to Roth IRA, I am a young professional and haven't accumulated much of a 401k yet, I feel like I would be better off in a Roth IRA. Any suggestions for who would be good to discuss my options in the Ankeny area?

Thanks for any suggestions.

Another decent place for information is on reddit.
https://www.reddit.com/r/personalfinance/

Since you said you are a young professional, I put you in the 25-35 age group.
https://www.reddit.com/r/personalfinance/wiki/early_career

When people ask me about investments, I generally first send them this flowchart.

 

[cowgirl836]

Another decent place for information is on reddit.
https://www.reddit.com/r/personalfinance/

Since you said you are a young professional, I put you in the 25-35 age group.
https://www.reddit.com/r/personalfinance/wiki/early_career

When people ask me about investments, I generally first send them this flowchart.

Bogleheads and r/PF are excellent resources.

If OP has no access to a company 401K, couldn't he just open a traditional IRA to transfer the 401k money into (assuming those contributions weren't post-tax), and then open a roth IRA as well? Something like Vanguard is pretty easy and low in fees. Then figure out how much he wants to contribute a month and split it between the two in a ratio he's comfortable with, staying under yearly contribution limits, of course. Depending on how much he's rolling over, he could do 100% post-tax contributions for a while to balance out.

I think general wisdom is that roth is better for young workers but it's really hard to predict where tax rates will be in the future, so diversity is key. Spouse and I split contributions between the two types.

 

[ricochet]

Not exactly true. If you are young - having all the growth being tax free more than makes up for paying more in taxes up front.

No, it actually doesn't. If the tax rate is the same you end up with the same amount of money in the end. Actually, if your retirement income was only the Roth IRA/401K the 401K would be slightly better because some of the money would be taxed lower (some not at all) until you get to your full tax rate. The Roth IRA money was probably all taxed at the full rate. There are other differences like distribution requirements and legal protections so it isn't always clear cut.

 

[Trice]

Looking at potentially moving 401k over to Roth IRA, I am a young professional and haven't accumulated much of a 401k yet, I feel like I would be better off in a Roth IRA. Any suggestions for who would be good to discuss my options in the Ankeny area?

Thanks for any suggestions.

In general a Roth is a good idea. But as a young person, presumably without a ton of disposable income, do you want to take the tax hit on a conversion?

If you don't have much of a balance, I would advise going to a low-cost firm like Vanguard and open up a traditional/rollover IRA, then moving your old 401(k) funds into this. Then open up a Roth IRA at the same firm, and start making contributions to this going forward.

Without knowing the specifics of your situation, here is some general good advice on where to invest.

1. If you have the option, always invest in your employer's 401(k) up to the point at which you max out your company match. This way you get all the free money you're entitled to.

2. Next, contribute to a Roth IRA until you've maxed out its limit for the year ($5,500 in 2017). (Perhaps you have a Roth 401(k) option with your employer, which would accomplish the same thing as far as tax diversification is concerned. But I recommend funding the the separate Roth IRA first, so you have control over that money. If they're in your employer's plan they are stuck there until you leave the company.)

3. If you've done #1 and #2 and still have money to invest, decide what to do next. You can invest more in the employer's 401(k) plan up to the IRS maximum ($18,000 in 2017). This might be a good time to use the Roth 401(k) with your employer, if you have that option. Or if your employer plan sucks (high fees or poor investment options) you could crunch the numbers and consider investing in a separate brokerage account.

Final advice: be careful from whom you seek advice. Insurance agents, banks, investment firms all have "advisers" trying to earn your business. Most are honest people but most/all of them earn commissions, meaning there may be bias in their recommendations toward products/funds that earn them more money. Watch that stuff closely. Go only for no-load funds with really cheap expense ratios. (These days there's rarely a reason you should have to pay more than, say, 0.4%/year and Vanguard has tons of choices at 0.2% or lower.)

 

[crash_zone]

No, it actually doesn't. If the tax rate is the same you end up with the same amount of money in the end. Actually, if your retirement income was only the Roth IRA/401K the 401K would be slightly better because some of the money would be taxed lower (some not at all) until you get to your full tax rate. The Roth IRA money was probably all taxed at the full rate. There are other differences like distribution requirements and legal protections so it isn't always clear cut.

Not sure I follow....paying taxes@33% now on $5000 is less than paying 0% on $50,000 (~20 yrs of growth) vs a lower rate on the $50,000. What am I missing?

 

[Trice]

I should add...my advice assumed you had access to a 401(k). I just saw the part about being an independent contractor so I presume that's not an option. In that case you have some homework to do.

I think the basic advice is the same, though. Roll your old 401(k) into an IRA (decide whether to convert to Roth or just leave it as is). Then fund the Roth IRA until it's maxed out. Then research your options after that. Though I'm not as familiar with it myself, this is a well-worn path so there's plenty of info out there.