i have a retirement plan from being a city employee, 457 deferred compensation through ING. i have it in part savings and part stock. do i still need a 401k/ roth ira and/or money market to boost up an investment gain?
Do I Have To Get A 401k/ Roth Ira And/or Money Market Investments To Boost Up My Financial Investment Gains?
July 10th, 2009 by admin Leave a reply »
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a 401k is not an option for you. A Roth is. Also a money market.
The big advantgae of the Roth is that all money earned in that account is tax free when you retire. Depending on you marginal rate when you retire that can mean an extra 15% to 28% for you at that time. And if you are young enough and put $4000 a year into your Roth, you may be looking at an annual income of $200,000 a year when you retire–tax free.
A money market account is not really an investment. It is a safety net for those unexpected expenses that sometime jump up at you. Everyone should have at the bare minimum of $5000 in one in my opinion, just in case. $10,000 would be even better.
Your 457 deferred compensation plan is 401k comparable plan offered by your employer. So you do not have 401k option.
Now depending upon your income, age, marriage status you can open IRA accounts and invest that money.
If you have money just sitting without earning anything, then you boost your investment gain by opening IRA accounts or opening CDs or money market or regular brokerage account and investing in stocks/Mutual Funds/ETFs.
Good luck!
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This is a really complex question…
1. Most people use a 401K because they work for companies that set one up for them. I know where I work, my company will contribute a matching dollar for every dollar I put into the 401K up to 5 percent of my total salary. This is a no-brainer because it’s like free money, although I can’t touch it until retirement. Another good thing is the money I contribute comes out of my pre-tax income, so it isn’t taxed and later reduces my taxable income at the end of the year.
2. A Roth IRA is good because you contribute cash today and can withdraw it tax-free at retirement. However you can only contribute your own cash (that’s already been taxed) so if your tax rate is going to be lower in your retirement years than it is today, you might not come out as far ahead as you’d like. However the growth of the IRA over the years will usually outweigh this easily.
3. The general rule of thumb is to take 120 and subtract your age and that’s the percentage of your retirement fund that should be in stocks; the rest should be in bonds and money market. And make sure that no more than 10 percent of your stock ownership falls in one company…just ask the people who were counting on Enron for their retirement.
Good luck