Roth IRA certificate or Roth IRA Mutual fund?
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Anonymous
| Is there a really simple site that compares the pros and cons for each option for someone getting their first job after college? |
Anonymous
| Certificate? |
Anonymous
|
Can you try your question again? A Roth IRA is a type of Individual Retirement Account (IRA) that accepts post-tax money and allows it to grow tax free until retirement. There are income limits for who can contribute to a Roth IRA based on how you file taxes (single, married filing jointly, etc.) Typically you go through a brokerage account or a bank to open a Roth IRA. I recommend using a broad index mutual fund like a Total Stock Market Index fund at Vanguard or Fidelity, maybe Charles Schwab, too.
Can you try again and we'll help? |
Anonymous
|
^^ me again
If you are asking about the pros and cons of using a Roth IRA vs. a Traditional IRA, here are the basics for beginners (advanced financial folks will see this is overly simplified but I think that's what you need): Roth IRA accepts post-tax dollars, i.e., you pay tax on the way in Traditional IRA accepts pre-tax dollars, i.e., you pay tax on the way out Mathematically, if you have the same tax rate your whole life, they will come out the same. However, if you expect your tax rate to be lower now than later, then you lean Roth. If you think your tax rate is high now and will be low later, then you lean Traditional. Most experts recommend a bit of each, typically using a workplace pre-tax retirement plan plus a post-tax Roth IRA on the side. If you just graduated college, your tax rate might be low, so maybe lean post-tax (Roth). |
Anonymous
Her question was perfectly clear. Certificate=certificate of deposit=CD I actually looked for a similar website a few months ago and didn't find it. I'd consider a few things, though. I think (but couldn't confirm this myself) that it might be more complicated to break an IRA CD if you're wanting to withdraw only principal. You still have to pay the penalties for breaking it, but I'm not clear on the tax implications given the penalty. In general you want Roth money in equities to grow faster but if using as part of an emergency fund, you wouldn't want equities right away. A potential compromise is brokerage money market and invest the gains only into equities because you can't withdraw those anyway. |
Anonymous
|
Sorry, I meant a Roth IRA Certificate of Deposit from a Credit Union like NFCU vs. a Roth IRA Mutual Fund from a company like Vanguard. I'm not even sure if these are options.
Signed, Newbie |
Anonymous
| Thank you both! |
Anonymous
| Here's the info about Roth IRA as an emergency fund: https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund |
Anonymous
| Thank you for the emergency fund link. |
Anonymous
| You are starting out in a Roth IRA, go with stocks, like a stock mutual fund. Would be appropriate. CDs are fixed income products, conservative and have less growth potential. You will have to open an acct with a brokerage firm to do this. Vanguard, Schwab, Fidelity, etc... Since theses are after tax contributions, you can take out your contributions at any time with NO penalty. The growth has a 5 year rule plus penalty if not 59.5 These accts are great for building wealth over time. |
Anonymous
| It's one of those thread where I wonder it I haven't heard of a new product or the poster is confused. Maybe both. |
Anonymous
You've been able to purchase CDs in a Roth IRA for years, maybe since Roths have existed? You can also have a Roth savings account. The A, by the way, stands for "arrangement," not account like everyone thinks. If you want CDs with Roth tax treatment, you can get them at a credit union or bank or get brokered CDs at Fidelity, etc. |
Anonymous
| For those who haven't heard of IRA CDs: https://www.navyfederal.org/checking-savings/savings/retirement-savings/certificates.html |