Basic questions about the Roth

[Guest BrianfromWash]

I have some very basic questions about a Roth IRA:

1) I actively participate in an employment-sponsored retirement plan and make about $35k a year. Is a Roth a good choice? As far as I can tell it would be, but I've heard that contributing to a Traditional would really make no difference for me since not too much of it would be tax deductible under current rules.

2) I understand there are income limits affecting contributions to a Roth IRA. Let's say that I start a Roth and 20 years down the road (I will only be 42) I find myself exceeding the income limit, making me inelgible to contribute to a Roth. What happens to the IRA? Does it just stay a Roth, except I can't contribute, or would I switch itto something else?

3) Knowing something about my situation, is there anything else I should know?

Thanks

[Guest Matt Tuttle]

At your age if you can afford the ROTH contributions it's a great idea---you can build a large pot of money that grows tax free. If you go over the income threshold it's no big deal you just stop contributing, your IRA stays intact.

Matt Tuttle

203-609-9077

http://www.wealthadvisors.bigstep.com

[John G]

The deductability of traditional IRAs is something of a "tease", especially if your tax bracket is low. Here is why. You will be growing your IRA assets for more than four decades (you don't ussually take all of the retirement assets out the day after you retire), your IRA assets may stay invested 60 years! Over that time you retirement assets should grow to a considerable amount (contribute 2k a year for 50 years @ 10% gets you above $2 million!) that will be added to pensions, SSN and other income. If you go the Roth route, the IRA amounts come out tax free. Roths also have no specific require distribution schedule.

Congratulations on evaluating investments at such a tender age. Some folks only start thing about it much later.

[Guest BrianfromWash]

Thanks for all your feedback on this matter. Long term investing really intrigues me, to the point of possibly seeking a career in finance somewhere down the road.

[Guest Matt Tuttle]

Good idea. As far as I am concerned there is no better career. Good luck.