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help me understand IRA

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Rage_Phish
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help me understand IRA  Reply with quote  

i need help because i have no idea what im doing

i have my 401k through work and i add to taht up to the company match limit, and its all in a few index funds that seem to do well and have grown nicely.

i have an IRA set up through TD Ameritrade that i also add to every pay check. but i then have to buy ETF or mutual funds. is this right? it seems to not grow at all other than what i put into it.

i dont know if im explaining my issue well enough. basically i like how i just have my 401k in index funds and its all handled for me it seems. i dont like how i always have to go into my IRA and purchase things. especially since its not doing anything it seems
Post Tue Sep 20, 2016 10:36 pm
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oldguy
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Since you are not maxing the 401k ($18,000) why not put the extra money there? That way you get the tax deductions, the index funds that you like, and the convenience. And the regulations are the same - age 59 1/2, age 70 1/2, etc.

BTW, you have a 401k so you might not be eligible for an IRA deduction, depends on your salary.

Also, TD Ameritrade can set up an automatic purchase plan if you ask them, just have them purchase an index with each paycheck withholding.
Post Wed Sep 21, 2016 12:18 am
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ken-do-nim
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I wish my 401k was growing nicely. And darnit I *think* I know what I'm doing ... but maybe I don't Smile
Post Wed Sep 21, 2016 8:12 pm
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Rage_Phish
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quote:
Originally posted by oldguy
Since you are not maxing the 401k ($18,000) why not put the extra money there? That way you get the tax deductions, the index funds that you like, and the convenience. And the regulations are the same - age 59 1/2, age 70 1/2, etc.

BTW, you have a 401k so you might not be eligible for an IRA deduction, depends on your salary.

Also, TD Ameritrade can set up an automatic purchase plan if you ask them, just have them purchase an index with each paycheck withholding.


why dont i just put more into the 401k?

honestly i dont know. i thought advice was to put in up to the company match, and then put into an IRA
Post Fri Sep 23, 2016 5:00 pm
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Publius
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quote:
Originally posted by Rage_Phish
quote:
Originally posted by oldguy
Since you are not maxing the 401k ($18,000) why not put the extra money there? That way you get the tax deductions, the index funds that you like, and the convenience. And the regulations are the same - age 59 1/2, age 70 1/2, etc.

BTW, you have a 401k so you might not be eligible for an IRA deduction, depends on your salary.

Also, TD Ameritrade can set up an automatic purchase plan if you ask them, just have them purchase an index with each paycheck withholding.


why dont i just put more into the 401k?

honestly i dont know. i thought advice was to put in up to the company match, and then put into an IRA


That's fairly common advice -- especially if you listen to financial shows like Dave Ramsey etc. And often it is because you might have access to a ROTH IRA where you don't have access to a ROTH 401k. The accessibility and advantage of the ROTH depends on your income and age. If you are making too much, you arent' generally allowed to use a ROTH. And the more you make, the less the value is because it is funded with after tax money (your horizon plays into this too because of the tax free nature of the growth). But, if you are using a traditional 401k and a traditional IRA, the recommendation often is based on the fact that you have more choices in an IRA than you do in a 401k. But you are using index funds (so do I, in all accounts), so the vehicle doesn't really matter and they are available in both places.

So you get the same net effect by putting the $ you are currently putting in your IRA into your 401k if you are wanting to invest in essentially the same funds. Plus you get the service and peace of mind of the funds being automatically invested each month without having to set it up in your IRA or manage it yourself.

There are other factors that might speak to this decision (fees in your 401k vs IRA for example), but absent that level of detail, I agree with old_guy. You are probably just well served by putting that $ in the 401k and it takes less effort on your part.
Post Sat Sep 24, 2016 3:49 pm
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Publius
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p.s. I, personally, max out my 401k and then put all additional invested $ in a taxable brokerage account. This has to do with our household income disqualifying us from taking advantage of the tax advantages of an IRA and disqualifying us from contributing to a ROTH. But it is to say, there is nothing magical about an IRA. The most important part of the equation is the routing of your money to a vehicle that will invest the $ and take advantage of compounding returns over time.
Post Sat Sep 24, 2016 3:53 pm
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Rage_Phish
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i should have been more specific

its a roth 401k and roth IRA

and our household income is a little over $120k (my $62k coming from me)
Post Mon Sep 26, 2016 5:45 pm
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oldguy
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quote:
its a roth 401k and roth IRA - -
household income is a little over $120k


At that income level, I would probably switch both into Trad 401k/IRA accounts. Ie, take the tax breaks now (while you're in a higher marginal bracket) and pay the taxes after you're retired (a little bit each year).

Have you seen John Bogle's book - The Little Book of Common Sense Investing? It's been around for a few years but it is spot-on. Bogle is the founder of Vanguard - and the inventor of Index Funds.
The book really is little, a quick read - and it will simplify your investing life immensely!
Post Mon Sep 26, 2016 6:48 pm
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Rage_Phish
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well shit, i dont even know what trad is lol

and never never read the book, i will look into it.

thanks!
Post Mon Sep 26, 2016 7:42 pm
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Rage_Phish
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oh, trad = traditional. im an idiot
Post Mon Sep 26, 2016 7:46 pm
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louiefrias
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RUN, don't walk from the IRA and 401(k).  Reply with quote  

They aren't designed for you. They belong to Uncle Sam. The wealthy don't use them, why should you?
Post Wed Oct 05, 2016 8:39 pm
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Petert0204
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Retirement Planning  Reply with quote  

Why not invest your 401K? Try investing in mutual funds or property. If you really want to grow your money then invest it rather than let it sit idle in your bank account.
Post Mon Nov 21, 2016 8:01 am
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