Author Topic: Opening a roth IRA  (Read 1482 times)

ariapluscat

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Opening a roth IRA
« on: July 27, 2016, 11:35:44 AM »
Ok be patient with me as I am a youth and come seeking hand-holding guidance.

I applied to open a Roth IRA retirement account via Merrill Edge because I have a Bank of America account.
I asked my employer's HR for information. I think via my employer I could open a Roth via Fidelity.

Is there a benefit in opening a Roth with my employer? My (foolish?) thought it that it wouldn't matter since they're after employment and state taxes.

I haven't worked there long enough to qualify for matching in retirement contributions in anything. So I haven't opened a 409 with my employer. Could the roth and that be connected? Would there be a benefit in connecting them?

Do I understand correctly that I can put in a max of $5,500/ year into the Roth IRA?

Dezrah

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Re: Opening a roth IRA
« Reply #1 on: July 27, 2016, 11:52:02 AM »
An IRA is a completely separate animal from your employer sponsored plans.  They have to do with each other and your HR person probably won’t be able to help you with the IRA. 

If you see the term “Roth” associated with your employer, this is not the same thing as Roth IRA, it simply indicates the contributions are after tax and will grow tax free in a similar fashion as a Roth IRA.  There are many other rules that apply to a Roth IRA that do not apply to your employer account though, so always make sure you know which one you’re looking at.

The only requirements to contribute to an IRA are that you have “earned income” through the year.  If you have a job, you have earned income.  The limit in a year is the lesser of your earned income and $5500.

Mother Fussbudget

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Re: Opening a roth IRA
« Reply #2 on: July 27, 2016, 11:56:59 AM »
You can open a Roth IRA at whatever trading firm you like.  An IRA or Roth IRA account is a completely separate entity from an employer sponsored retirement account (like a 401K).  You get a separate-bucket-of-savings-allowed by the IRS for saving in an IRA / Roth-IRA, so in an ideal world, you would have BOTH a 401K AND at least 1 IRA or Roth IRA.

Many around here like Vanguard brokerage accounts - because Vanguard also offers low-cost exchange traded funds...  AND... when trading Vanguard ETF's in a 'Vanguard account, the buyer does NOT  pay commission fees.  Also, Fidelity brokerage accounts - Fidelity also offers low-cost ETF's - usually mapping directly to similar Vanguard ETF's - and similarly, you can purchase and pay NO COMMISSION on the Fidelity ETF's in a Fidelity brokerage account.

Just realize you have low-cost options.  YOU decide where you want to open that account, and which firm you want to deal with long-term.   

All the best, and welcome to the world of long-term savings!


ariapluscat

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Re: Opening a roth IRA
« Reply #3 on: July 27, 2016, 12:16:24 PM »
An IRA is a completely separate animal from your employer sponsored plans.  They have to do with each other and your HR person probably won’t be able to help you with the IRA. 

If you see the term “Roth” associated with your employer, this is not the same thing as Roth IRA, it simply indicates the contributions are after tax and will grow tax free in a similar fashion as a Roth IRA.  There are many other rules that apply to a Roth IRA that do not apply to your employer account though, so always make sure you know which one you’re looking at.

The only requirements to contribute to an IRA are that you have “earned income” through the year.  If you have a job, you have earned income.  The limit in a year is the lesser of your earned income and $5500.

Ok, I'm going to see if I can set up an appointment at the bank to have them explain how it works.

My employer has several Roth plans that they seem to call supplemental retirement plans. I'm going to ask them for details about the different options. If I understand correctly they're Roth 403 accounts, but I'm not sure.

How is that so few requirements can be so confusing when you start out!?!

ariapluscat

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Re: Opening a roth IRA
« Reply #4 on: July 27, 2016, 12:19:20 PM »
You can open a Roth IRA at whatever trading firm you like.  An IRA or Roth IRA account is a completely separate entity from an employer sponsored retirement account (like a 401K).  You get a separate-bucket-of-savings-allowed by the IRS for saving in an IRA / Roth-IRA, so in an ideal world, you would have BOTH a 401K AND at least 1 IRA or Roth IRA.

Many around here like Vanguard brokerage accounts - because Vanguard also offers low-cost exchange traded funds...  AND... when trading Vanguard ETF's in a 'Vanguard account, the buyer does NOT  pay commission fees.  Also, Fidelity brokerage accounts - Fidelity also offers low-cost ETF's - usually mapping directly to similar Vanguard ETF's - and similarly, you can purchase and pay NO COMMISSION on the Fidelity ETF's in a Fidelity brokerage account.

Just realize you have low-cost options.  YOU decide where you want to open that account, and which firm you want to deal with long-term.   

All the best, and welcome to the world of long-term savings!


Thank you for all of this info. I'm going to have to process it a little before I can make any sort of intelligent response. Other than thank you :)

frugaliknowit

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Re: Opening a roth IRA
« Reply #5 on: July 27, 2016, 01:04:11 PM »
Also:  In case you did not know:  If and when you open a Roth with a broker, you can have them charge your checking account whenever you want to add a contribution.  In fact, what I have done in the past is have Vanguard charge my checking account on payday (every other Wednesday) for $1/26th of the maximum Roth contribution.  It's the same effect of having your employer taking it out of your paycheck. 

MoonLiteNite

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Re: Opening a roth IRA
« Reply #6 on: July 30, 2016, 05:20:01 AM »
Another short answer to help you be unconfused

401k and ROTH 104k - come from your work, generally they put in some money when you put in some. Their account will have limited option in what you can buy. You can have many 401k accounts each from any jobs you have opened any with. There is a government limit of around 16k (i think) that you can put in every year.

IRA and ROTH IRA - TONS of places have IRA, vanguard, lendingclub, etrade, fidilty, tons and tons of places. You can only put in about 1/3rd of what you can than with a 401k, of only 5,500 each year. You can open up as many of these accounts  as you like, on as many websites, but ONLY can put in that yearly max amount. If not uncle sam gunna be pissed.