Lisa wrote:
- quote -

It's not really an issue of after-tax or pre-tax. The biggest reason is
the flexibility of Roth IRA rules. You can take out your contributions
at any time without penalty and you have unlimited investment choices.

will-you are correct I meant to saya 401k rolled into an IRA will have
a minimum distribution and a Roth IRA will NOT have a minimum
distribution.

Lisa wrote:

- quote -

Lisa,

Ignoring the effect of taxes, Roths provide a lot more flexibility.
This is important to people who may want or need to tap their money
before retirement, though as many have pointed out in this thread, this
is not necessarily a good thing. Roth's also provide a lot more
investment options than your typical 401(k).

On the other hand, you can typically get mutual funds at the
institutional expense rate and with no loads (even when they normally
have loads) through your 401(k). This may be offset by the charges that
your plan provider imposes, however. In my employer's plan, I can buy
Class A shares of the mutual funds in our plan with no load, so that's
kind of cool. 401(k)'s also have the advantage of automatic payroll
deduction making saving virtually pain free.

From a pure return point of view, a Roth is only better if your
marginal tax rates will be higher in retirement than they are now. If
they are lower in retirement, the 401(k) is a better option. If your
tax rates are the same in retirement as now then it's a wash as to which
retirement vehicle you choose. Of course, predicting the future of tax
rates is no easy task.

-Will

John A. Weeks III wrote:

- quote -

I'm not sure why you say this. The relative advantages of Roths vs. a
401(k) are the same regardless of age, aren't they? Young or old, you
either pay tax now or you pay tax later.

-Will

noreplysoccer[at]hotmail.com wrote:

- quote -

Is this a typo? I don't think Roth IRAs have minimum required
distributions.

-Will

I'm no expert, just a layperson who's done some reading, and here's my
best interpretation. You can confirm what I've said at this site. Also,
I think you mentioned you had a financial planner, so make him explain
it all too.
http://www.fairmark.com/rothira/disttop.htm
You'll probably be most interested in the links "Tax-free
distributions" and "First Time Homebuyer"

- quote -

Yes.

- quote -

No. After 5 years, you can take "qualified distributions", like first
time home purchase.

- quote -

First of all, you have to wait 5 years for the first time homebuyer
withdrawal (I forgot to mention that before). Before 5 years, you can
only take contributions without penalty. After 5 years, $10,000 is for
earnings. So you can take $20,000 of contribution + $10,000 earnings if
you want.

- quote -


I've seen this advice a lot but I've never understood it. Why is
putting money in an after tax Roth IRA better than putting into a
pre-taxed 401K? I'm currently trying to max my 401K, I'm putting 9%
abve what they match.

Thanks,
Lisa

cntams[at]gmail.com wrote:
- quote -

Carl,
A Roth IRA is unique in that you can use one to invest in a huge variety
of investments, and the earnings aren't ever going to be taxed, as long
as you follow the rules for withdrawals. There really isn't anything
like that in the world of taxes. If you plan to be at all wealthy later
in life, a Roth is going to be one of your best assets. Compare this to
your 401k/IRA where every dollar withdrawn is taxed, or a mutual fund
where your year-to-year income is taxed as well as any gains when you
finally sell. This is a "free pass" on taxes and there aren't many of
these available.

If you don't bother to contribute...well, you've lost the chance to do
so. You can't go back and make up any contributions you didn't make in
earlier years. And these early ones matter the most, they have the most
time to grow. Also your income might ramp up to where you can't
contribute in the future (due to income limits), or where you prefer the
immediate tax deduction that comes with the 401k contributions.

As for the $10k for home - as Skip hinted, that's just a bad idea, this
is a retirement account and you shouldn't think of a piggy bank that you
can use for other things. Yes the IRS allows it but that doesn't make it
a good idea. You save for retirement, you save for a house, you save for
other stuff - these are different goals/accounts. If you don't have that
$10k for the home, I think the answer is, you can't afford to buy that
home, unless there are some unusual circumstances (eg your retirement is
secure due to other assets). Once you take out the $10k you can't
replace it and if you left it there for the next umpteen years you'd be
sitting on a pile of tax-free dough.

Believe me in ten years when you're looking at say $50k of completely
tax-free retirement dollars that STILL have 30 more years to grow it'll
all make sense! It'll be a great excuse to take a year off and go to
Fiji or whatever. It's not just at retirement that having a lot of
retirement savings pays off.

-Tad

PS keep in mind a Roth IRA is just a type of account that you can open
all sorts of places. Choice of investments is another question and this
only works out if you don't put the money in duds.

On Wed, 12 Jan 2005 15:56:03 CST, "Bucky" <uw_badgers[at]mail.com> wrote:


- quote -

While we're talking about the benefits of withdrawing Roth
contributions, it might be helpful to reflect on the future value of
those withdrawn contributions (had they remained in the plan), and,
whether or not the withdrawn contributions can be reinstated so that
once again the saver will enjoy the benefits of a Roth.


-HW "Skip" Weldon
Columbia, SC

Thanks for all of your response, i guess it's sounds a pretty good idea
to have Roth IRA. But before that, let me go ahead and make some things
clear for myself first...

1: I can retrieve my money (means my own contributions to put in the
account annually) at anytime for any reason with "NO PENALTIES AND
TAX", correct?
2: I know that after the first 5 years, I can retrieve money (now, I DO
mean my contributions and appreciation toagether) with "NO PENALTIES
AND TAX", correct?
3: What if I can't wait for the first 5 years, or I need to have money
to buy a house in the 3rd year, is it true that I can retrieve up to
$10,000 with no penalties and tax? what is this $10,000 means? the
earnings? that is, can I take out $10k and my own contribution without
penalties when I buy a house in my 3rd years?
4: Anything else I need to pay attention, please also let me know!
Thanks for your time and patience,
Carl

cntams[at]gmail.com wrote:
- quote -

Roth IRAs have very flexible rules. See the section "withdrawals"
http://personal.fidelity.com/product...aboutira.shtml

As others have pointed out, you can withdraw contributions at any time
without penalty. This sounds unbelievable, but it's true. You can also
take out $10,000 penalty-free for a first time home purchase and other
qualified withdrawals.

- quote -

When you say you're putting 6% into 401K, do you mean 3% contribution +
3% match? If you're putting more than the company match, I would
strongly recommend putting that into a Roth IRA.

I am 31 and have a Roth IRA and a 401k and after tax investments. It
depends what you want to accomplish...

401k reduces tax I pay and gives me free money. I put 10% in and get
another 6% match.
Roth IRA allows more money to grow tax deferred. There will be
required minimum distributions with a Roth IRA. If my 401k were rolled
over to an IRA, there would be IRS required withdraws. The Roth has
more freedom in this regard. There are other benefits, such as gains
on my depsoits will not get taxed if I meet other withdraw rules and
Roth can be passed on to heirs and maintain its status (I'm somewhat
fuzzy on this, but read this benefit somewhere).

after tax investments allow me to withdraw money for my house, car,
vacation or medical expenses.

In article <1105545219.782176.235060[at]c13g2000cwb.googlegroups.com> ,
cntams[at]gmail.com wrote:

- quote -

First off, the 401K is tax sheltered, just like a traditional
IRA, Roth IRA, or 403B. As a result, if you want to contribute
just to your 401K, that is OK with me.

Each of these accounts has some specific details that vary
from account type to account type. For young people, the
Roth has the advantage that you can take out the money later
on without having to pay taxes. But, you lose the ability
to write off that money today. Older folks do not gain from
that trade off, but it is a major windfall for younger people
(assuming that Congress doesn't figure out what they did and
change their mind later on).

As a result, most pundits suggest funding your 401K up to
the match (to get the free money), then fund your Roth.
If you max out your Roth, then go back to the 401K and put
more money in there.

There are ways of using your retirement money prior to age
59-1/2. You would need help from an accountant, so if the
need arises, visit a qualified accountant to figure this
out for you. But in general, don't plan to use your
retirement money early. When you retire, you will need to
eat, and you cannot eat if you spent the money when you
were 40. And you don't want to be left at 72 years old
fighting the stray cats and dogs in the neighborhood for
table scraps that you dig out of garbage cans.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

cntams[at]gmail.com wrote:

- quote -

Hi Carl. Your advisor didn't adequately explain the benefit of a ROTH.
You can take out and spend anything you put into a ROTH for any reason
at any time without any tax or penalty. It is only *earnings/appreciation*
that must stay in there till retirement (or first house etc).
ROTHs are the best thing to invest in after getting all the employer
401k match. Then, if you can max out your ROTH contribution, fill up on
the rest of your 401k. I keep my emergency 6-months expenses money in a
ROTH.
Joe

Hi all,
I have a question about setting retirement plan. I am 25 years old
and currently putting 6% (3% company match) into my 401k account.
Now, my financial advisor told me that I should also open up a
Roth IRA so I can contribute more into the retirement plan, and best of
all, the money is so-called "Tax Sheltered" and I am take up to $10,000
out when I buy my very first house. I am really thinking is it
necessary to open up another account like this, eventhough it's tax
sheltered, I won't be able to take money out until I am 59 1/2 years
old. what's the point? I don't mind to put in another 2-3% into my 401k
account. but an additional Roth IRA, I don't think it's that useful.
plus, why don't I just put money into mutual funds account, even though
it's not tax sheltered, but I can take it out whenever I want to...
But anyhow, can someone give me some advise on what I should do...
Many Thanks,
Carl