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Discussion Starter · #1 ·
I would like very much to start a Roth IRA due to the tax free withdraws when we retire, but after researching the idea, I'm still a little confused. DH made about 44K last year & I wasn't sure about the monthly contribution amount that would be allowed....would we be able to deposit as much as we can a month? b/c that amount would vary - could be $5....could be $100....what would happen if DH lost his job & we couldn't contribute anything for awhile?? Thanks:)
 

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I have a ROth IRA and I only contribute 1 time a year. I put the max in that I can. You have until April 15 to contribute for 2010.
I think the max for me to put in for 2010 is $5000. The amount that you can contribute varies on your age and income. But you are under the income amount so age is the only factor. I think under the age of 50 is $5000 and over 50 is $6000 per year. The amount you can contribute does change yearly sometimes. Depends on what the gov. set it at.
We wait to contribute until we do our taxes. Sometimes DH has to split his amount between his Roth and traditional so our income tax is lower.
YOu can contribute more than 1 time per year, you do not have to put the max in each year. In fact I think you can open one up and then never contribute to it again if you do not want to. SO it DH losses his job you do not have to contribute to it.

I do think you have to open one up with a certain amount of $$ but after that it is up to you what you want to contribute.
 

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The amount you can contribute is only affected by the type of investment you choose. If you have a Roth with a brokerage, they may have a minimum amount to open the account, and then they may only accept 250.00 contributions.

Most banks have IRA accounts that are like simple savings accounts. You don't get alot of interest, but you can make weekly or monthly payments to it. Once you build enough up into the account, you can transfer it into another investment that may give you a better yield. Our bank requires at least 25.00 contributions.

Remember, a Roth IRA is a retirement account. What you put your money into will vary by the type of organization it is. Banks do CDs, brokers do stocks, bonds, and mutual funds. Insurance companies do annuities.
 

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You can open brokerage account style Roth IRAs with companies like Schwab, TD Ameritrade and the like with very little or no minimum amount.

As others have said, you only have an annual maximum - no monthly limits other than of course you can't go over the annual amount. There is no downside to putting money in then stopping for a while - the point of a retirement account is to put money in and let it grow.

What you should *NOT* do is - ANYTHING - not until you've learned more about the types of vehicles available to you and then HOW you want to invest your money WITHIN those vehicles.

In your mid 40's if you're only now just getting started preparing for retirement then you need to come up with a very aggressive strategy because you've got only about 20 years left which isn't nearly as much time as it sounds when it comes to investing.

You need a good picture of where you are first before you can map a route to where you want to be.

Tell me about your bigger overall financial picture - do you have debt? Savings? A retirement plan with work?
 

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Discussion Starter · #5 ·
Greebo..the only debt we have is the house. DH finally started a 401K 3 years ago with his company.... but I feel that we should be doing more with any extra money that can be spared...even if its only a few dollars here & there.
 
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Also - not that this should be a problem for you - but at certain income limits you are no longer eligible to contribute to a Roth IRA. I believe it starts at $140,000 and phases out entirely by $160,000.
 

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Greebo..the only debt we have is the house. DH finally started a 401K 3 years ago with his company.... but I feel that we should be doing more with any extra money that can be spared...even if its only a few dollars here & there.
Absolutely - but since you have house debt my suggestion right now would be to be contributing ~15% (maybe a bit more) of your whole house gross income towards retirement, then tend to any children's educational needs, then focus on paying the house off as fast as possible.

If your DH's job has a match, then you should invest in the 401k up to the match first. Second, you would fund the Roth IRA up to the $5,000 limit - or to the 15% mark, whichever comes first. Finally if you're not at 15% yet, go back to the 401k. And if you are able to max that out before you hit 15% (roughly 16k) , then good for you and you'll need to look into non-tax preferred options.

You do not want to retire with house debt - but you also don't want to have a paid for house and no money. :) That sounds flip but seriously - getting the house paid off SHOULD be the higher priority because every day you accrue interest on the house offsets your rewards from putting money into retirement. On a $200,000 house, early efforts to pay the house off can save one almost as much as the original purchase price of the house (if on a 30y fixed mortgage) - and that's just LIKE having $200,000 more in the bank when you retire.

If you do retire with house debt, then you end up having to take out much bigger chunks of money out of retirement very early IN retirement in order to keep up with the house payments. The ultimate goal when you retire is to be able to live on a mere EIGHT percent of your investments each year. Why 8%? Well you *ideally* want to never have to pull out so much money in one year that you actually *lose* ground. If you assume that each year, taxes and inflation will cause you to lose 4% of the effective value, and if you have strong mutual fund investments that are yielding long term annualized returns of 12%, then 12% - 4% = 8%. That would mean that your investment grows enough to offset what you spend and/or lose to inflation. Make that work and you can live to a ripe old age and die with lots of money in the bank for your descendants.

If you don't make 12% - or if you go over 8% - or if inflation is higher - whatever - then your principal nest egg is diminished, and you risk leaving nothing for your children or worse, running out of money before you die.

So if you retire with a mortgage payment, then it's MUCH harder to live on just 8%. I mean - if the average cost of living is say $2,000 a month without a mortgage, then having ferinstance a $1k/month mortgage means you need half again as much in investments. Living on 8% that means you go from needing $300,000 at retirement to $450,000 at retirement.

That's a huge jump to make when you're starting at 40.
 
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