I am always surprised at the number of people who do not know what a ROTH IRA is and why they should have one. My financial adviser explained it to me years ago and I have been a strong proponent of them. For my UK audience, sorry I have no clue what might be equivalent to this!
Easiest way to explain this is through an example.
Joe is saving $500 a month into his 401k. He pays no tax on this money. When he retires he has accrued $500,000 in his retirement account and starts to withdraw. With each withdrawal he pays tax at whatever the current rate is. So if he had paid in $200,000 with no tax, he then pays tax on withdrawing $500,000.
Mary is also saving $500 a month into her Roth IRA. She pays tax on this money at today’s rates. When she retires she has also accrued $500,000 in her retirement account and starts to withdraw. With each withdrawal she pays NO tax. So if she had paid in $200,000 and paid tax on this, she gets to withdraw $500,000 TAX FREE.
The only gamble you are taking with this account is whether future tax rates are going to be higher or lower than today. The way governments are having to spend I think there is very little chance of future tax rates being less than today.
Most Credit Unions and banks/brokerage firms offer Roth IRAs. Best to use 401k to keep company match money in and then extra money you invest into your ROTH. Remember, don’t keep all your eggs in one basket!!! With my sense of balance I have always thought this a very apt expression.
OK, I better do some legal disclosures here, just in case. I am not a financial expert nor do I have any qualification in it. Consult a certified financial professional before changing your investment strategy. My words of wisdom are my free expression of speech and do not reflect the views of anyone I am affiliated to, whomever that might be!
A few weeks ago I bought an Ipod Touch. It was one of those gadgets that had been sitting at the back of my mind, but not enough to make me run out and buy one. I don’t know what happened though…oh yes, I remember now. I am going for a vacation trip to Scotland and won’t be staying with my Mum. How is one to stay connected on the web if you have no PC with you?
I didn’t want to bring a laptop – too much hassle. So I was looking for alternative. Just needed something that would let me surf basically. I looked into a blackberry, but I was dubious about the whole cell phone data transfer costs.
Into my radar pops the Touch – uses wifi so no cell phone contract and it looks cool and is cheaper than a laptop. Who could ask for more? Course, I had to have one right there and then – instant gratification and all that!
Oh, how it changed my life…well maybe not quite that extreme, but I do love it. Amazing how many places have wifi available now. I downloaded some free apps that let me do quick currency conversions, bank account checking, free voip calls, airline checking options, weather and time for specific locations, Google maps and toilet finder based on location and of course games.
I’m not a big gamer – but I am addicted to Solitaire again. It also changed my TV viewing habits. I can surf while I watch TV on the couch. /never realized how distracting Twitter could be when watching CSI!!! I now find that every 10 mins I have to check if I have new email of tweets. I check the news before I go to sleep at night. Ahhh, portable web surfing in the palm of your hand – I LOVE it!
And there are so many cool FREE apps that let you play. I have one that lets you make your own bobble heads out of any picture you have loaded. Another one lets you tap a drum set along with any music you are playing. Stupid little things, but fun to amuse friends with.
I got the 8gb version and I still have a load of space left. Probably if I was really into the games I would be better of with a bigger version. For now though, this little gadget suits me just fine.