Haduken

Retirement Accounts, getting old and loaded

by: Ross

RMSZero sent me this article about retirement accounts. Everyone should read this article to refresh/learn about Roth IRA’s and 401k’s.

Roth IRA’s and 401k’s are both retirement accounts that give you tax benefits for saving money until you old and boring (usually around sixty-five). 401k’s are sweet because you don’t pay income tax on the money you put into them. Its like taking some off the top for yourself before The Man gets to it; you do, however, have to pay tax on it when you withdraw money from the account. Roth IRA’s contributions are taxed before you put them into your IRA. This is good, mostly because you are poor now, but you won’t be later, ie. you pay lower taxes. I mean there are some other details but that is the gist.

Read the article and look at the charts. It will make you want to set one up.

Comments.

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  1. the other benefit of the 401k is that since you dont pay taxes on it now, you have more money in there sooner to generate interest on, hopefully giving you even *more* money when your bones start predicting the weather.

    unless the stock market crashes, then youre dead either way.

    but as some guy said one time, the best investment you can make is in your own and your family’s educations. because that will pay off (with money and otherwise) 10x more than any retirement fund, unless you get a phd in kinesiology (being a gym teacher) or something.

    — midas | @

  2. here is a good follow up story

    — nic | @

  3. Now if only I had some extra money to invest.

    — Daniel | @

  4. Just a quick note about the stock market crashing. I just want to incourage people to not get freaked out if whatever investment choice you have made to invest your 401(k) or IRA into suddenly takes a down turn. You are buying shares, so the value of those shares now isn’t really that important, in fact a down turn means a lower price for shares. So your money buys more shares.

    This isn’t to say that you should invest in things that are sure to tank, because you can buy alot of the crap. More of just a way to be positive when your index fund or Life Cycle plan takes a bit of slip.

    — nic | @

  5. well let me just say now is a good time to invest in latin america cuz they keep voting in socialists and driving my profits down.

    — midas | @

  6. my guess is, with the crumbling Social Security Administration the only load that most elderly Americans are gonna have by time we retire, will be in their pants.

    — RVAkid | @

  7. I think it is a little misleading on how awesome a Roth IRA can be because it assumes that you are making less than $95,000 past your 20s…but I guess that reinforces the importance on saving now while you still qualify to put away the max amount.

    — stephanie anne | @

  8. Yeah I mean if I am making more than 95k in a couple of years I think I would consider myself very successful.

    — MaxPower | @

  9. Yeah, I don’t feel bad for people who are making more than 95k. At that point you can afford to pay a financial advisor if you can’t figure it out yourself.

    — nic | @

  10. I’m not saying to feel bad for anyone making more than $95,000, I am just pointing out that in looking at a full financial plan that reaches past your 20s assuming that you will be contributing to a Roth IRA at the max amount is in a lot of cases not going to be a correct assumption…you will have other investments instead, most likely without the tax breaks.

    — stephanie anne | @

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