Maxing out a Roth IRA

[casinoboy3]

Actually this is an exception to what I said about just my opinion. If you ask anybody about the Roth, they'll say the same thing. Max out your Roth IRA by all means! Do this before you buy a single Xmas decoration. I'm serious about that. If you completely ignore everything else I said, but did just that, I'd be ecstatic.

Am I right, guys?

Hey - didn't know where else to post this but did a search for "roth" and this came back... so ...
I have 3k in a roth right now (2003 contribution), 26 shares of SPY, in at around 111.00. All i hear is people saying to max it out every year.... and I can still do that for 2004... so if I do that, would it be wise to purchase another 25 or so shares of SPY at this level, around 119.00? I don't feel I have enough money in the account to diversify with individual stocks at this point (As I've learned in the past). And another quick question..... the max contribution for the year is 3k, between roth and traditional IRAs..... well when I worked this summer, the company began to take some money out of my paycheck and put it into a 401k without my knowledge, and so when I quit in September I had to convert it into a traditional IRA.... so does that $500 count as a contribution for this year, meaning I can only contribute $2500 to my roth?
Thanks so much for your help, I rarely post but always check in to see whats going on.

[Karel]

Well, you are free to start your own thread when your question/point is off-topic enough. I hope you'll get some answers. Investing in the market when you don't have enough to invest in stocks looks good to me. Your Roth questions I can't answer: for tax purposes I am a Non-Resident Alien.

Regards,

Karel

[abk33139]

Something I wanted to add to the Roth topics, but I can't remember where the orignal thread was.....someone posted that everyone should max out their Roth contribution each year. For me, and please correct me if I'm wrong, buying a Roth would have to come after I max out the matching program from my employer for my regular 401k. My employer matches $.50 for every dollar I put in, up to 3% of my annual salary. So, unless I'm maxing out that benefit, I wouldn't purchase a Roth.

Happy Trading,
Alison

[jiesen]

uh, oh, it looks like I have to brush up on my Roth rules. Serves me right for opening my big mouth!!

Anyway, no, CB, I don't think (I'll have to check on this and get back to you again) the contribution to your Traditional IRA affects your contribution limit to your Roth. They may both be the same limit amount, but they are independent (you can put $3000 into each). The Roth is way better though, since your gains will not be taxed when you take it out in 30 years after much appreciation.
As for the SPY- I have NO idea when a good time to put money into it is. My OPINION is that you should put the money into it when you have the money to put into it, if that's what you want to do with your money. Sounds like a reasonable plan to me.

And Allison, you're right, it's more important to max out your 3% 401k contribution first, since your employer is matching those funds with FREE MONEY!!!! If you're NOT maxing that out, you're doing it wrong! Go fix that now, and tighten your belt if you have to, but it's worth saving that money for later. (and it's just 3%, how hard is it to put that away?) Anything else you can save to put in a roth, you should, by all means. It's just the absolute best way to avoid taxes on your investment in the long run. Find some way to save that extra $3000, you know you can do it! Also, if you can't do it by the end of the year, you get until April 14th (might be 15th, but have to check), 2005 to actually put the money in the account as a 2004 contribution.

[abk33139]

Just to clarify, I have to put in 6% to get the $.50 on $1.00 match with a 3% max. For example, if you make $50,000/year, the max the employer will put in is $1,500, so the employee has to contribute a minimum of $3,000.

I do put in 6%, so that's not a problem. I just wanted others to be aware the if you're not maxing out that option first, you're losing some free money.

Alison

[jiesen]

Just to clarify, I have to put in 6% to get the $.50 on $1.00 match with a 3% max. For example, if you make $50,000/year, the max the employer will put in is $1,500, so the employee has to contribute a minimum of $3,000.

I do put in 6%, so that's not a problem. I just wanted others to be aware the if you're not maxing out that option first, you're losing some free money.

Alison

good point. 6% is a little tougher to do than 3%. (my 401k is 4% right now, but I don't get any match... I plan to increase it 2% with each raise I get, so I don't feel any pain)

[scifos]

Something I wanted to add to the Roth topics, but I can't remember where the orignal thread was.....someone posted that everyone should max out their Roth contribution each year. For me, and please correct me if I'm wrong, buying a Roth would have to come after I max out the matching program from my employer for my regular 401k. My employer matches $.50 for every dollar I put in, up to 3% of my annual salary. So, unless I'm maxing out that benefit, I wouldn't purchase a Roth.

Happy Trading,
Alison

ALWAYS ALWAYS ALWAYS contribute the max to your 401k when the employer matches. Its free money and you should never turn that down. After you've contributed to the 401 k to the point where your employer no longer matches, then you could go to your 401 k manager or human resources manager and tell them to not withhold any more for the rest of the year (just remember to sign back up again next year) and then work on your roth or credit card debt or whatever else.

EDIT: Oops, jiesen already told you this.