14 thoughts on “Another blog post about Roth IRAs

  1. I'm thinking about this post and the post where you decided not to max it out – and frankly, I'm confused.

    For someone who wants to invest and then just let it sit there – why are you afraid of the potential of some artificial "high" today when you're not going to be pulling out the money for 40 years?

    Between now and then there are going to be a lot of ups and downs in the market – It just seems a bit silly to worry about something NOW when it will be negligible in 40 years.

    • You're right it was silly. I was not worried that my account wasn't going to grow, I was concerned that I would be purchasing at a bad time, when the market was at a peak. I more thought I was going to get a bad deal, because I thought the market was going to go back down. I was basically trying to predict the future and that strategy ended up being a bad choice. So again, I wasn't fearful that my money wouldn't grow over the next 40 years, I was just hesitant to invest because I thought I was buying overpriced stuff.

      • Right, but, let's say it was like $4 overpriced a share compared to a non-high price. Over 40 years of approx 8% growth the difference of $4 isn't going to be that big – especially when you have so many shares from the "high before the recession" price. =)

        • Sorry didn't complete the thought… the idea of not full contributing even during a small artificial high is silly because over 40 years that high (even if it was artificial) is negligible compared to not contributing at all.

  2. You write elsewhere: " I own three different mutual funds: a large blend, small blend, and international fund."

    Not knowing what these funds are, I would only suggest keeping your money in low-cost index funds like Vanguard's, because high expense ratios, loads, and other management charges can do a lot to erode the value of your money over time, and these are factors you can control. You might also want to have a small percentage in a bond fund for diversification and to cushion losses in the stock market, though at your age going aggressive is a pretty good strategy.

    As for contributing the max to the Roth vs. paying down student debt, I can see how you'd justify the latter. Your Roth is going to grow over the decades anyway, and a thousand here or there won't make much difference at this point.

    • Preach Larry. All three of my funds are all Vanguard Mutual Funds. Gotta make my dollar work as hard as possible, and can't be paying the ridiculous fees some companies charge. I'm holding off on the bonds for now as I have a long time until I retire and want to be pretty aggressive in these early years.

      • You might want to consider reading the Bogglehead's Guide to Investing PunchDebt – There is some really great advise in there about the different types of mutual funds. They make it so painfully and excruciatingly clear how good of an investment index funds are that track the stock market. Also, it is a fantastically interesting book (though I'm sure there will be those who find it dry, when you're interested in what they have to say it is really, really well written).

        • Agreed, and Ninja might want to look at the Bogleheads forums online as well. There's a very interesting thread going right now on "Bonds in Your Twenties."

  3. I love, love, LOOVE my Roth IRA. It was there for me when my employer said, GIRL, WE AIN'T GON' MATCH YO' FUNDS! I know, my employer needs to work on the grammar, huh? Anyways, I haven't maxed out my Roth because I want to save up for a house. I have steadily contributed to it since March (I totally lucked out with that). I've contributed $2,320 and as of today, my account is worth $2,781.78. I totally should save more, but I prefer having that money in cash sitting in my bank account with my 1.5% savings rate. Sarcasm aside, I'm planning on contributing way more next year.

  4. The Roth IRA has been fantastic for us. This year, my company also began offering a Roth 401(k)! I am maxing both. I would love to own a chairtable trust if/when we retire with that much money 🙂

    Also, it's hard to justify the diversion of retirement assets to pay off current debt. First off, your current debt at 7% isn't 7% compounding. The 8% return you are robbing is compounding returns. Not apples to apples. Each year doesn't make a large difference now because we are in our 20's and our balances are around $100,000 or under. However, when we are in our 60's, one year of 8% returns could be over $500,000! I like to think of it as, you're not contributing more money today as much as you are tacking on an additional year of investing then.

    Enjoy!

  5. FYI, JFW was already taken by the damn comment program! I am therefor regressing about 5 years into my old AIM handle:) Looking forward to more finance posts, I am a geek for numbers.

    Roth IRA's are the sweet nectar of the congress gods. Drink up.

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