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There is a never ending debate about where you should direct your retirement contributions - into a traditional 401k, Roth 401k, a little of each? a portion into a regular taxable account?
I know this to be true because I’m constantly getting involved in this debate, sometimes on my blog, sometimes elsewhere. Here’s a Roth401K vs Traditional 401K thread over on All Financial Matters (from yesterday) - that I commented on this morning - dealing with this subject. (Please keep in mind, there are some well informed people chiming in.)
Roth 401k retirement plan option
With the growing popularity of the Roth 401K plan, you get yet another option in the universe of possibilities; as if American investors weren’t confused enough with all their choices. Keep in mind, the income limitations that make investorsineligible for a Roth IRA do not exist with a Roth 401K contribution.
Left scratching your head
It seems to me, when it comes to planning the future, people don’t know where to begin. It’s the same type of overwhelming feeling you get when walking down the cereal aisle of the super market. It almost makes you want to turn around. I know I put the blinders on and just think Lucky Charms, find the Lucky Charms, lol.
When I first started writing this blog in no way did I have the word frugal on my brain.
I knew what the word meant, but it wasn’t until I became a part of the PF (personal finance) blogging world that I really started to appreciate and understand the significance of this simple word.
“Some of the main strategies of frugality are the reduction of waste, changing costly habits, suppressing instant gratification by means of fiscal self-restraint, seeking efficiency, avoiding traps, defying expensive social norms, embracing free (as in gratis) options…”
A deeper meaning
I think that definition is pretty accurate. I also think it’s kind of ironic how I used to attach a negative connotation to that word (which I think most of the general public still does) and how I now look at it in a completely new light.
I think there’s a misconception that once you hit 60 (and beyond) it’s time to kick back, put your feet up, grab a beer and relax. That’s not always the case.
For most people, their 60’s are a time where they experience a tremendous amount of change which takes some getting used to.
At this point in their lives, most Americans are nearing full retirement age after having worked the majority of their adult lives. Many of the daily routines that they’ve grown accustom to are about to change, big time.
Out with the old, in with the new
Their kids are probably all grown up and out of the house, the mortgage is paid off (or nearly paid off) and pretty soon you won’t have to crawl out of bed, slap the alarm clock and head off to work any longer.
Yes my friend, it’s time to start preparing to cross over and make the leap from pre-retirement to bonified retiree. If you’ve planned for retirement most of your working life, then transitioning into retirement starting in your 60’s should be relatively smooth.
Every week I’m becoming more and more comfortable in my blogging skin.
Each day I’m becoming more and more comfortable with the responsibility that goes along with writing this blog. And trust me it’s a responsibility, but one I am more than happy to accept.
This blog is now officially my baby! And like having a baby there comes a few little side effects…
Most nights I go to bed with email requests, post titles and blogging ideas swimming through my head, often waking up in the middle of the night. But I’m learning to deal with the sensory overload and I realize it can only get better as time goes by. (I hope;)
I’m here to help
One of the blogging responsibilities, that I hadn’t thought of early on, is reading and answering email. For me, it certainly sets me back (time wise) but it’s also what I enjoy doing most; it makes me feel good to know visitors are getting something out of Chance Favors and that I can genuinely help them.
Every time I’m on the internet or watching TV I hear much of the same investment rhetoric over and over and over.
I’ve written about this kind of thing in the past, in a post titled CNBC and Me. Well, in this post I’d like to peek into the retirement arena, where the needle seems to be stuck on repeat; specifically the Roth vs Traditional IRA debate.
When it comes to IRA planning, commentators are always delivering the same soggy, watered down message, often speaking out of both sides of their mouth. Here’s a good example of something you might hear…
‘When it comes to picking an IRA, sometimes investing in a Roth IRA makes the most sense, and sometimes investing in a traditional IRA makes the most sense.’
Want some visual evidence? Please take a minute to watch the above video produced by Vanguard and you’ll see what I’m talking about.
I firmly believe most GenXer’s should make theRoth IRA the cornerstone of their future retirement plans.
In my opinion, over the next 10-15 years the Roth IRA and Roth 401(k) will quickly become the backbone for retirement planning in this country.
For Americans under the age of 45 you should put the wheels in motion to incorporate the Roth IRA into your plans ASAP; and for those over the age of 45, I strongly recommend taking a close look at how adding (or converting to) a Roth IRA may add a whole new dimension to your future plans.
(I’ll probably spend the next few days writing about the Roth IRA. While writing this piece, I experienced a surge of new ideas that inspired me to scribble down an abundance of Roth related post ideas that, undoubtedly, will beef up that section of my tag cloud. Happiness is…)
In my mind I know what I want to accomplish with this next phase of the blog, but figuring out exactly how to bring it to life, for my millions of readers (haha), is another animal all together.
Right now, I’m diligently researching many of the different mechanisms that will be involved in the ‘Down Home’ segment of this blog, and hope to present my ideas as clearly as possible.
I’m also in the process of building a lineup of friends that are going to be the subjects of the upcoming posts. They will remain anonymous, but are mostly the same people that gave me the answers to the straw poll I conducted before I started this weblog.
I’ve written about what inspired this blog in the past, here’s a bit more fodder…
I meet with clients (mostly Baby-boomers) that are generally well off and will live comfortable lives. They need my help with managing their assets, protecting their net worth, education and survivorship planning, etc.
And I’m happy to give it to them, in fact I love doing it. But these people are the lucky ones…
In 1998, the Roth IRA was introduced. Since then, many people have converted all or a portion of their existing Traditional IRA’s to Roth IRA’s, where distributions are eventually tax free. When converting from a regular IRA to a Roth IRA, the amount of the conversion is taxable in the year of the conversion.
This law is changing, starting in 2010, anyone who converts to a Roth will pay no taxes that year, taxes will be due in 2011 and 2012. If there ever was a time to convert, 2010 is it. But like everything else, you need to do your homework. Let’s take a look at the Roth IRA Conversion calculator…
In the ‘About’ widget, that appears on the right hand side of every page, it reads, ‘There’s a heavy focus on all things Roth IRA, with special attention given to the upcoming 2010 Roth conversion event.
Now I know some of you have definitely heard of the Roth IRA and maybe even a few of you know what a Roth Conversion is, but I’m pretty sure nobody has heard of ‘Down Home’ financial planning. Well, I plan on changing that fact (pardon the pun).
I know you’re probably jonesing to know more about ‘Down Home’, but first a little background about ‘formal’ planning…
Ciaran McKeever is a CERTIFIED FINANCIAL PLANNER™ professional.
Chance Favors hopes to educate, encourage and empower those in their 30's and 40's to achieve financial independence. There's a heavy focus on all things Roth IRA and 401k, with special attention given to the upcoming 2010 Roth conversion event.
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There is a never ending debate about where you should direct your retirement contributions - into a traditional 401k, Roth 401k, a little of each? a portion into a regular taxable account?
When I first started writing this blog in no way did I have the word frugal on my brain.
I think there’s a misconception that once you hit 60 (and beyond) it’s time to kick back, put your feet up, grab a beer and relax. That’s not always the case.
Every week I’m becoming more and more comfortable in my blogging skin.
I firmly believe most GenXer’s should make the Roth IRA the cornerstone of their future retirement plans.
This week is going to be a light week when it comes to original planning related content.
The lucky ones
In the ‘About’ widget, that appears on the right hand side of every page, it reads, ‘There’s a heavy focus on all things Roth IRA, with special attention given to the upcoming 2010 Roth conversion event.
