Roth IRA contribution for 2014?

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Hello all,

Looking for a little advice about opening a Roth IRA, and perhaps contributing for 2014 (I have up until April 15, 2015 to do this, right?)

I know relatively little about them beyond the very basics, since my parents don't use them (their financial advisor is lukewarm about them, and I suspect from what I've read so far that they may actually be ineligible anyway...) The notion of having my funds able to grow tax-free is obviously quite appealing, so I figured it was time to ask questions about this particular financial tool.

1) Can you contribute the maximum $5500 IN ADDITION TO maxing out a 401k? ($17,500 + $5500 being $23,000 to tax-advantaged accounts)

2) Can I hold Vanguard index funds within a Roth, just like in my taxable positions?

3) Is there any reason I shouldn't go ahead and max this out right now?

A few relevant details about my situation to consider first - 26, single, income ~50k/yr, already maxing 401k and sweeping additional savings to taxable Vanguard funds and savings account as they accumulate.

Any advice you may have is very much appreciated. Thanks!

[MDM]

1) Can you contribute the maximum $5500 IN ADDITION TO maxing out a 401k? ($17,500 + $5500 being $23,000 to tax-advantaged accounts)

Yes.

2) Can I hold Vanguard index funds within a Roth, just like in my taxable positions?

Yes.  See https://investor.vanguard.com/ira/roth-ira?WT.srch=1

3) Is there any reason I shouldn't go ahead and max this out right now?

Not really.  One could quibble about Traditional vs. Roth but with you in the 15% marginal bracket, Roth is very defensible.

Have fun!

[terran]

Looking for a little advice about opening a Roth IRA, and perhaps contributing for 2014 (I have up until April 15, 2015 to do this, right?)

Correct!

1) Can you contribute the maximum $5500 IN ADDITION TO maxing out a 401k? ($17,500 + $5500 being $23,000 to tax-advantaged accounts)

Yep!

2) Can I hold Vanguard index funds within a Roth, just like in my taxable positions?

It might depend on where you set up your IRA. Vanguard would be a good choice in which case you certainly can invest in Vanguard funds.

3) Is there any reason I shouldn't go ahead and max this out right now?

Definitely a good idea to open an IRA while you can still contribute for 2014. Whether you open a traditional or roth is up to you. The general advice is that a roth is as good or better if you expect your tax rate in retirement to be the same or higher than it is now, and a traditional is better if you expect your tax rate to be higher. Some disagree and seem to think traditional is better. Since my wife and I are in the 15% bracket I tend to think I can't end up too much lower, and I could end up higher either with higher income or the government raising taxes across the board, and since we're investing in traditional tax deferred retirement accounts as well, we're kind of hedging our bets by using Roth IRAs. Just my two cents -- you should look into traditional vs roth for your own situation and what you think will/might happen with your taxes.

[Cwadda]

(I have up until April 15, 2015 to do this, right?)

Yes.

Good info and advice from other posters.

Also 401(k) max is $18,000 for 2015.

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(I have up until April 15, 2015 to do this, right?)

Yes.

Good info and advice from other posters.

Also 401(k) max is $18,000 for 2015.

Cwadda, thanks for the reminder. I've set my 401k contributions to 40% for this year so I shouldn't have any trouble topping that off.

Thanks for the comments, all! I've been lurking around the MMM site since mid-2013, figured it was time to stop being a wallflower here on the forum and dive in.

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So here we are, about a month removed from Tax Day...thank you all for your input! I was able to set things up with Vanguard and contribute the max to the Roth for 2014. Look forward to doing the same this year. Cheers!