Rich Carreiro wrote:
- quote -

Right you are. I just assumed that the OP did not have that much
available to put away for retirement (but apparently he does, from his
followup post). I would still max out the Roth IRA first (for its
flexibility), then the 401K.

"eric" <ewpete[at]yahoo.com> wrote in message
news:1138656624.707504.184690[at]g44g2000cwa.googlegroups.com...
- quote -

You have to look at each year individually. If you qualify for 2005 and
think you will qualify for 2006 you can make contributions to a Roth for
2006. If you determine later that you do NOT qualify for the Roth for 2006
you can notify your trustee and have the contributions recharachterized as
either a deductible of nondeductible traditional IRA.

Gene E. Utterback, EA, RFC

"eric" <ewpete[at]yahoo.com> writes:

- quote -

Each year stands alone, so it only means you can't contribute in
the year you go over.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

First I wanted to say thanks to all for your time answering my
question. I'm very grateful for the time you've taken to reply.

In my situation, I believe I understand what I need to do now. I'm
going to max out my 401k, so that I can save as much as possible on
taxes for the current year. It sounds like even though my company
doesn't offer a matching plan, the tax savings will still be overall
beneficial to me. To start, I'll direct my investment into a Money
Market account, and in the mean time become more self-informed in my
other investment options.

It sounds like a Roth IRA will be a good auxilliary investment, and I
will plan on putting as much as I can into that. My remaining question
is regarding the Income Limits on the Roth IRA. Currently I am under
the income limit for a married couple, but since I do hourly contract
work, it's possible in the future that my overtime pay could put me
over the limit. What if we invest in an IRA this year and go over the
limit next year? Will the funds still remain in that account? Does
that mean we just can't contribute for the year that we went over?

Sincere thanks for your help,
-Eric

[Moderator: sorry; I hit the send button too soon on the previous msg.
you can post this instead]

jIM wrote:

- quote -


Actually, you can withdraw money from a Roth at any time without penalty
(the principle, but not the earnings.) So if you do not have any
emergency funds, a Roth is one of the safest places to save that first
$4000 each year -- you can get it back if you need to. If there is no
emergency, and there seldom will be, you are $4000 farther along in your
retirement savings.

I wish I had learned this when I was a lot younger.

Bob

jIM wrote:

- quote -


Actually, you can withdraw money from a Roth at any time without penalty
(the principle, but not the earnings.) So if you do not have any
emergency funds, a Roth is one of the safest places to save that first
$4000 each year -- you can get it back if you need to. If there is no
emergency, and there seldom will be, you are $4000 farther along in your
retirement savings.

I wish I had learned this when I was a lot younger.

Bob

Goal 1) start saving

401ks, Roth IRAs, traditional IRAs, regular (taxable) accounts all have
their benefits. The also have different rules.

401k- deposits are made before taxes. So if you earn 100,000 and put
in 8%, you have deposted $8,000 into the 401k AND you are only taxed on
$92,000 ($100,000-$8,000 in 401k is $92,000). The yearly max for a
401k is quite high (depends on age). 401k withdraws will be taxed.

Roth IRAs- deposits are made after taxes. Qualified withdraws are tax
free. Yearly max is $4000. if you make $100,000 you will pay taxes on
all $100,000. You can then deposit $4000 into a Roth IRA account. The
advantage here is you choose the custodian (such as Vanguard or T Rowe
Price). I use T Rowe Price and highly recomend them. others here will
tell you it does not matter, they like Fidelity or they like Vanguard.
Choosing a custodian to some people is a religion, I am not that way.
I own T Rowe Price funds and Vanguard funds. Your wife could also
contribute to a Roth, so your total yearly contribution can be $8000.
If older, this amount is more. These maximum contributions will
increase in 208 (I think) to $5000 each. Older people can contribute
more.

You could invest in taxable accounts. The advantage here is you will
have access to money within a week of needing it. Fewer rules
(maybe?), less restrictions (probably). If you make $100,000, you
could contribute all $100,000 to the taxable investment account. You
would pay taxes on all $100,000. If your investments do well, and you
keep the same investment for more than 366 days, the gain on the
investment is taxed at lower rates than 401k withdraws (maybe) or your
normal income tax bracket. You will be taxed on any gain in the
account which is SOLD.

Assume each desposit gained $2000 in 366 days (1 year)

401k withdraw would be $10,000 and all $10,000 is taxed at your normal
income tax rate (28%?)

Roth IRA withdraw would be tax free (you would have to wait for
retirement age for this to be true and meet other rules). All $10,000
is yours, tax free.

Taxable account. Withdraw is $10,000 the $2000 gain is taxed at long
term capital gains rate (maybe 20%?). Captial gains rate is designed
to be less than ordinary income tax rate.

My summary would be consider account type, consider withdraw rules,
consider tax rates (when you plan on using the money). I suggest using
an account which restricts withdraws (such as Roth) so you don't use
the money for car repairs or a vacation.

"Rich Carreiro" wrote:

- quote -

$20,000 if you're over 50 with the catch-up contributions.

Another advantage is that it comes out of your paycheck - you never have the
money in your hands to spend instead of save.

"Bucky" <uw_badgers[at]email.com> writes:

- quote -

On the contrary -- there's a big advantage to it --you can put up to
$15,000/yr in it.

- quote -

And then what?

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

eric wrote:
- quote -

If your company doesn't match, I would not use your company's 401K,
because then there's not really any advantage of it over other
retirement plans. I would open up a Roth IRA account and max it out
each year ($4000). You have until Apr 15 to make the 2005 contribution,
so this should help you catch up. If you're completely new to
investing, then the easiest way to start is with index funds. After you
learn more, you can expand to other investments. I recommend these 2
low cost companies that you can open a Roth IRA account:
Fidelity - mutual fund as well as stocks
Vanguard - mostly focuses on mutual funds

Here's a good article:
http://finance.yahoo.com/columnist/a...eymatters/1853

For further reading:
http://finance.yahoo.com/education/retirement

Hi. Charles Schwab isn't bad, so don't worry about that,
but you may want to ask how much of your contributions
go to fees for managing the 401k.
The first thing you should do is to *get* interested in
investing, just the basics, to protect yourself.
The first best thing you should do for a retirement
plan, is to open your own Roth IRA with a low-cost
company like Schwab or Fidelity or Vanguard. A Roth
will allow you to take your contributions back out without
penalty, if you have an emergency.
You really should read one or two books for your own
benefit. I recommend:

Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
by John C. Bogle

Your 401k will have many options for your investments. I recommend
just putting your funds in a simple money market account until you
have an idea of what you want and how to get it without paying loads.

The current wisdom is to invest in this order:
1 - put as much into a 401k to get the maximum match (not available to
you)
2 - put as much as you can into a ROTH, up to it's limit
3 - add more to the 401k to it's max.

401k contributions will help you immediately by lowering your
taxes. Roth money doesn't lower your taxes, but no matter how
big it grows by investments, you will never pay any tax on it if
you withdraw it according to the rules.

Hello all.
I've read some threads on the internet and tried to figure out what i
should do with our 401k plan. I have never enrolled any kind of
retirement plan--401k, roth RIA or traditional RIA, neither my
unworking spouse. We have no single clue about retirement plan till one
day we read something related to retirement plan online. Untill then
we realized what we missed and how importanted retirement plan meant to
us So we decided to jump in and do some savings toward our elder
life
One week ago my company informed me that i was eligible to participate
in 401k. After reading all the paperwork they sent to me and doing
some small communications, i understand that my company doesn't offer
any matching plan, unlike any other companies Also my 401k is called
self-direct plan that i have the full control regarding to where and
how to invest...which makes things worse cuase we two have no interest
or idea about investment And the only company we can choose and use
is Charls Schawb. From our understanding by reading some threads
online, Charls Schawb is not a good choice at all, right? So does it
make any sense for us to do our 401k through our company or we should
buy it somewhere else if its possible? What should we do if we don't
want to get involved in investing but having somebody else taking care
of it?
thanks very much for your help!!