71 votes
Accepted

Company with high match for 401K vs IRA, which to choose?

Max out the 401k. The uncapped match is a free 50% rate of return and no other investment can match this.
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  • 6,989
57 votes

Can I hire my kid and start a Roth IRA for him?

Forget the Roth for one moment. Having a $5500 deduction for your LLC would be great. Parents hire their kids all the time. To do real work at a reasonable wage. Do you have work that's appropriate ...
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54 votes

I'm 18 and have 6 grand. What should I do with it?

A Roth IRA is a great idea. You can only put in as much as you earn (as in, get in paychecks) each year, but that shouldn't be too much of a problem for you right now. You're paying nothing in taxes,...
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  • 34.6k
52 votes

I'm 18 and have 6 grand. What should I do with it?

Unlike others, I do NOT recommend putting your $6k into a retirement fund this early. It's a bad idea.1 If you're overflowing with money after college and don't know what to do with this $6,000 then, ...
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  • 3,267
49 votes
Accepted

Why is half of your IRA Required Minimum Distribution forfeited if you do not make minumum withdrawals by 70.5 years of age?

According to the link below, it does appear that you must take an RMD, or Required Minimum Distribution, from your IRA at age 70½, or face a 50% penalty of the RMD AMOUNT that has NOT been taken, ...
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  • 2,710
48 votes

Should I open a Roth IRA or invest in the S&P 500?

Your question indicates confusion regarding what an Individual Retirement Account (whether Roth or Traditional) is vs. the S&P 500, which is nothing but a list of stocks. IOW, it's perfectly ...
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  • 48.7k
40 votes
Accepted

IRS sent me a letter...I messed up by unwittingly taking money out of a Roth IRA and reporting it incorrectly

There could be a few reasons for this, my first guess is that you didn't report the distribution on your return (indicated on line 15 of your 1040, pictured below), the IRS got a copy of the 1099-R, ...
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  • 62.9k
38 votes
Accepted

Is a Roth IRA good for a high schooler?

You are correct that if your income is low enough that you don't have to pay taxes, then a Roth will let you avoid taxation at both ends, because Roth withdrawals are tax-free. You are also correct ...
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  • 23.8k
33 votes
Accepted

My company is suspending its 401K match; what is the best thing to do with my money?

Based on your comment, I see no reason to stop all contributions to your 401k except for the following reasons: Your investment choices in the 401k are horrendous (bad funds, high fees) or the ...
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  • 7,998
32 votes
Accepted

Did I make Roth IRA contribution after the deadline?

You are misunderstanding the deadlines. The deadline for 2017 contributions is April 15, 2018. And the deadline for 2018 contributions is April 15, 2019. The contribution you made on July 5, 2017 ...
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30 votes

Is there any reason to invest in stocks, ETFs, etc. outside of a tax-advantaged account?

Some thoughts: There's a limit to how much you can put in a tax-advantaged account. Even with mega back-door and other ways to move money around, there's still limits into how much you can contribute ...
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  • 113k
29 votes

I'm 18 and have 6 grand. What should I do with it?

First, it's great that you're considering these options at all, and that you're trying to be responsible and forward-thinking about planning for your future. I'm also going to break with the ...
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  • 444
28 votes
Accepted

When do you actually pay taxes on Roth IRA contributions?

There's no additional income tax burden created when you decide to make Roth IRA contributions, your Roth IRA contributions are taxed at the same time all your income is taxed. If you earned that $...
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  • 62.9k
27 votes

Why is half of your IRA Required Minimum Distribution forfeited if you do not make minumum withdrawals by 70.5 years of age?

You elected to defer paying taxes by contributing to an IRA. Lawmakers simply want to make sure that they collect those taxes by requiring you to either withdraw the money (incurring a tax liability) ...
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22 votes
Accepted

Why are there income limits for Roth IRAs?

Because Congress said so. Now, if you're asking for the legislators' rationale, it's something along the lines of: We only create tax shelters when we "need" to; otherwise we just make our deficit ...
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  • 490
22 votes

Are Roth IRA dividends taxable?

For a Roth IRA, everything withdrawn is tax free as long as you meet the age/time requirements. You are correct that the contributions have been taxed; but the dividends, interest, and growth due to ...
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22 votes

Company with high match for 401K vs IRA, which to choose?

It's very tempting to max out the 401(k), for the reason Hilmar mentioned. Remember, though, that there's more in life to save for than emergencies. For example: House down payment Vehicle ...
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  • 48.7k
21 votes
Accepted

Roth IRA: Vanguard vs Free Advisor's Mutual Fund

American Funds? Also look at their annual expenses. And this is from the AMCAP fund, a "growth fund" in their offering, the expenses over 10 years for a $10,000 investment: To put this in ...
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17 votes
Accepted

Rationale for lower deduction limits for married couples filing separately?

From the Joint Committee on Taxation's General Explanation Of The Tax Reform Act of 1986, page 220: Congress concluded that rules that encourage filing separate returns give rise to unnecessary ...
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  • 23.8k
17 votes
Accepted

401(k) forfeited and check issued. What can I do to avoid penalty?

If the check was payable to you, you had 60 days to deposit to an IRA. But, it needs to go into the same type of IRA as the 401(k) was. i.e. if the 401(k) was traditional, it goes into a traditional ...
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17 votes

My company is suspending its 401K match; what is the best thing to do with my money?

It depends much upon your plans for the future and other financial information. My advice would be to make sure you are out of consumer debt and have a healthy emergency fund in place. You could ...
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  • 74.9k
16 votes

What are reasonable administrative fees for an IRA?

Zero. Zero is reasonable. That's what Schwab offers with a low minimum to open the IRA. The fact is, you'll have expenses for the investments, whether a commission on stock purchase or ongoing ...
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16 votes
Accepted

Using a Roth IRA instead of a college savings account

One problem with this plan is that the individual must have earned income to contribute to a Roth IRA. If you have an infant, unless she is the new Gerber baby or something like that, there is ...
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  • 276
16 votes

What can we do when we are stuck in a conservative 401(k)?

401(k)s are designed to provide easier access for average workers to save for retirement, and provide an incentive for employers to provide plans that help by either matching contributions, or ...
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  • 113k
15 votes

What should I do with my $25k to invest as a 20 years old?

TL;DR I don't like your strategy. Don't wait. Open an investment account today with a low cost providers and put those funds into a low cost investment that represents as much of the market as you ...
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15 votes
Accepted

If Roth IRAs are not reported on income tax returns, how does the IRS police them?

You do not report the Roth IRA on your 1040 because it has no implication to your current tax situation (as you fund it with after-tax dollars). Your IRA custodian(s) would report the contributions ...
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  • 34.6k
15 votes
Accepted

Does a Roth IRA offer any explicit benefits over a Traditional IRA?

Your math is correct. As you point out, because of the commutative property of multiplication, Roth and traditional IRAs offer the same terminal wealth if your tax rate is the same when you pull it ...
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  • 14.8k
14 votes
Accepted

Does it make sense to take a lower salary so I can still contribute to a Roth IRA?

No. Even if you don't need the additional salary income now, you might be able to contribute the incremental amount over the Roth max to either of the other two types of IRAs, or maybe even something ...
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14 votes
Accepted

What's the deadline to contribute to a Roth IRA

According to the IRS page on Roth IRAs: You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions). ...
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  • 34.6k
14 votes
Accepted

Why would I ever invest in a traditional IRA over a Roth IRA

Your confusion is that that answerer is not comparing a $5500 Roth IRA contribution to a $5500 Traditional IRA contribution. Rather, they were comparing a $3600 Roth IRA contribution to a $5000 ...
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  • 15.6k

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