Due to some unexpected circumstances and poor planning in 2014 neither my wife nor I have been able to contribute to a company run 401K plan.

My employer does not offer a retirement plan benefit yet (due to it being an early stage startup). My wife opted out of her employer's plan anticipating a need for higher cash flow (due to temporary unemployment).

Assuming we are eligible for a Roth IRA contribution, I plan to contribute after I figure out our 2014 taxes. In the meantime, is there something else I can do?

  • 1
    I'm a little confused. Why not contribute to a regular IRA right away? That would keep your taxes lower. Are you asking for a liquid investment until you determine your tax liability for this year? If so, an interest bearing checking account or money market might be your best option (or T-bills). Perhaps a mutual fund, but you could lose money there.
    – user1731
    Commented Nov 3, 2014 at 17:45
  • @barrycarter: The OP's wife was covered by an employer plan, so depending on their income, it may be that one or both of them may not be able to deduct Traditional IRA contributions. Although, the income phaseouts for deducting Traditional IRA contributions as "not covered but spouse covered" are the same as the income phaseouts for Roth IRA contribution for Married Filing Jointly; so if he is able to contribute to Roth IRA, then I guess he should also be able to deduct Traditional IRA contribution.
    – user102008
    Commented Nov 4, 2014 at 20:30

1 Answer 1


Well you can do a ROTH or a traditional IRA subject to income limits. People often prefer a ROTH as you pay tax on a little and no tax on the big. You pay tax on the $1000 or so you earn this year, but 30 years from now, when it is worth $20K or so you pay no tax. (The numbers here are only meant to be relative.)

With an IRA, you get to deduct that amount from your AGI, so you don't pay tax on part of your income. For someone in a high tax bracket, say 33%, there is some value to this as they can view it as making an immediate return on their money. (Rather than paying the IRS $333 and having $667 in my investment account, I have $1000.)

Keep in mind that if you go IRA, or ROTH you have until 15 April 2015 to contribute for the 2014 tax year.

Also keep in mind that a ROTH or an IRA is not an investment, they are designations of investments. Money designated as either one of those can be in a bank savings account, a mutual fund, certificate of deposit, or even used to hold gold or real estate.

I would suggest for most novice investors, that are pretty young (under 40), your best bet is to open an account with Fidelity or Vanguard and invest in a indexed mutual fund. Then take time to learn about different mutual funds and other investments. Their customer service teams will walk you through the process.

In most cases you are better off with a ROTH than a IRA.

  • Okay, so it sounds like I may be able to contribute up to $5.5K (but no more) to an IRA (eg: SEP-IRA) and deduct that amount from our AGI or contribute that same amount post-tax to a ROTH IRA (but not both).
    – Sam
    Commented Nov 4, 2014 at 19:00
  • Pete - A 25% (marginal rate, joint) earner can save pretax, and find that at 2014 rates, the first $94,100 of income would fill the 15% bracket. A 4% withdrawal rate implies $2.3M pretax is what it would take. And the tax bill would be $10,162 on that withdrawal, an "effective" or average 10.8%. Please explain why Roth is generally better. (Unless of course, you mean for the current 10-15% earners. Then, never mind) Commented Nov 5, 2014 at 3:01
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    JoeTaxpayer: Holy cow someone finally understands that you can throttle your income in retirement. I agree with you, if you do it that way. However, most articles assumes that upon retirement we mindlessly withdraw the lump sum, pay taxes on it and dump it into an annuity.
    – Pete B.
    Commented Nov 5, 2014 at 20:41

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