Roth IRA???

[Guest CrewDawg1]

I am currently in UPT and would like to start a Roth IRA. Those who have a Roth IRA, who did you go through? Good/Bad companies? USAA? I have no real experience working with investments/retirements and am looking for any information that I can get.

[duece123]

I have a Roth through Vanguard. They offer a target retirement fund similar to those of the TSP. The Target funds are very well balanced between US and international stocks, and they have very low expenses. You do not need to know a ton about the market to invest and make money. Some of my buds use Fidelity for their IRA’s. They also offer some kind of Life cycle or target fund. Good luck!

[Champ Kind]

I use USAA's Cornerstone strategy fund. No complaints at all and it's been working out well since I started it about two years ago.

My only advice would be to avoid any company that charges up-front fees.

[Guest Hydro130]

My best advice for any mutual funds is to pick one that has a good long-term track record, and whose fund manager has been with that fund for a while. Get the prospectus and read up on what the fund manager's goals are. For IRAs, I stick with boring ol' index funds. Nothing spectacular, but they have time-proven, long-term performance. There as safe a bet as you get with the stock market, and so are a good choice for retirement investments. For investments other than IRAs, I go with other funds to stay diversified (international, techs, etc).

And yeah, do the TSP too. Again, I just went with the index fund offering for that.

Cheers, Hydro

[Insubordinate & Churlish]

I did what Deuce did as well. Well balanced funds and the lowest operating costs in the market are the main selling points

Vanguard Target Fund

[Murph]

I've got the USAA Aggressive Growth fund. The growth hasn't been too aggressive at 4% YTD but hopefully things will change.

[Guest C-21 Pilot]

Both my wife and I max out the USAA's Cornerstone strategy fund as well and have been doing so for over 8 years now.

My advice would buy the Investing for Dummies (https://www.amazon.com/Investing-Dummies-Se...n/dp/0764551620)...

You also have a few weeks left to put money into a 2006 IRA as well. If you have $4000 to spare, I would recommend doing that first, then begin a monthly $333.33 into a 2007 IRA - which will give you better tax benefits (once you file).

As far as a selection, USAA offers really good deals and has plenty of no-load funds. Many folks like USAA because of their ease, but as Hydro stated, you will need to do your research. If you bank w/ USAA, they offer pretty good financial advice (member benefits) and can walk you thru the process (800 531-8181). You can still call them if you are interested in USAA.

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These came from this post and are good advice: https://www.dynamictruth.com/ubb/ultimatebb...176.html#000003

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There's lots of variables and lots of good places to invest your money. You'll need to decide what's important to you.

Some variables to consider:

price of trades

access to mutual funds

annual account fees

do you want a local branch that you can walk into and talk to someone?

do you want all your money in the same place (checking / savings / investment / retirement / mortage ...)

Research available

Do you want to make investment decisions or do you want someone to do that for you or are you somewhere in between?

ease / cost of electronic money transfer

online access to account / trades

access to IPOs

tax information provided

https://www.kiplinger.com/personalfinance/m...07/brokers.html

has a nice discussion of online brokers. I don't think they looked at USAA.

Here's smartmoney's take: (pretty comprehensive)

https://www.smartmoney.com/brokers/index.cf...tro&nav=dropTab

Looking through the following websites should clue you in on other perspectives.

MSN Money

Kiplinger's

CNN / Money

Smartmoney

If you sign up and decide later that you don't like the broker, you can very easily transfer your assets to another company. The new company will be 1) happy to do it for you 2) probably give you some money or free trades to bring your account to them. I used to chase the free money offers a few years ago, and ended up deciding it wasn't worth the handful of brokers' tax statements when doing my taxes.

If you end up paying more than 1 or 2% of your assets as a fee, you're paying too much. Many index funds will allow you to pay significantly lower fees on the order of .25% (generally index funds). I recommend not having all of your assets in index funds, but that's up to you.

AND

Normally I go to USAA with banking/investing, but my Roth IRA is with Vanguard. It's an indexed fund that becomes less risky the closer you get to your retirement, called a Target Retirement Fund. It's well diversified and has a very low expense ratio of .21%.

My IRA selection is per advice from an excellent book, "Smart and Simple Financial Strategies for Busy People" by Jane Bryant Quinn. It is an easy to read book and not too long.

Thanks to F-15E WSO and C-130 Hopeful

[LJ Driver]

Originally posted by Murph:

I've got the USAA Aggressive Growth fund. The growth hasn't been too aggressive at 4% YTD but hopefully things will change.

WTF? YTD? As in 2007? Your fund has increased 4% in 13 days. So in other words if your fund performance stayed consistent (which it won't) it would increase 112% for the year...

[Guest C-21 Pilot]

LJ...man you are bustin' balls tonight.

Its obvious that he meant 2006...

[DeHavilland]

The savings opportunities today are great. Not many folks on this board probably had investments when the market tanked in 1987. I knew a guy that luckily was several years from a 20 yr. retirement that was pretty much financially drained from that event. If you are just getting started, read the advice from others and look at the links. Pick something you are comfortable with and whatever you do, start investing now. With a decent return, that will do more to help your money grow than virtually anything else you can do except maybe rob a bank. Everything you can read will show you the huge advantage of starting early in life to increase your savings. Give till it hurts in some type of Roth IRA, and use the TSP too. If you deploy, take all that extra cash they are paying you, the tax free earnings being earned and the base pay you are saving because you are in Krakizstan and give till it hurts some more to the 10% savings program the gov't offers. That is a guaranteed 10% return. Tell me anyone who offers such a guaranteed return.

Bottom line-Pick something and start today. You will thank yourself later in life!!

[Guest ilovermont]

I've been very happy with our USAA investments. It's worth giving them a call even if you're not sure exactly what you want. They gave us a lot of great information.

[Insubordinate & Churlish]

Just curious, but does the TSP program match any percentage of your contribution?

[duece123]

no matching for the TSP

[Guest C-21 Pilot]

C-130 Hopeful,

Here is the official answer (a few minutes late from the above post):

https://www.tsp.gov/uniserv/features/chapter04.html

When they begin to match will be the day that I join the TSP.

Congress has asked the Sec of the Army to "consider" setting up matching contributions in an effort to help w/ recruiting. Nothing for the AF yet...

https://www.washingtonpost.com/wp-dyn/conte...er=emailarticle

[ 14. January 2007, 10:38: Message edited by: C-21 Pilot ]

[Guest Rainman A-10]

Originally posted by C-21 Pilot:

When they begin to match will be the day that I join the TSP.

Matching is nice. So is not paying taxes.

What pretax investment vehicles are you using right now that allow you to invest $15K/year like TSP (I'm assuming you're active duty)?

Pre-tax investment is always a good thing. Max out anything that allows you to do that. For most of you on active duty that means TSP.

Some people say you have to be careful if you think you might be in a higher tax bracket when you retire. I would suggest you not worry about that. The laws of compounding will allow you to make more money (pre-tax and free of tax while it grows) if you start with more money. Most people should be more sophisticated investors once they hit retirement and it is likely you will be able to offset your tax issues.

As for Roth IRAs, try to max them out too. You want to do this now, before you become ineligible.

I wish they had TSP for the entire 21 years I was in the USAF. I get a higher percentage of my pay than younger guys will get at 20 years but I was also not able to invest in TSP for 20 years.

FWIW, your money is NOT locked into TSP forever. You can yank your TSP when you separate and put it somewhere else if you want (I did).

Be careful when you are investing tax exempt combat income. Don't put it somewhere it'll be taxed later. Your TSP statement will list which portion of your investment is tax exempt. Make sure your investment advisor is aware of that if you roll your TSP over when you separate. Mine caught it without me having to point it out. You earned that tax exemption by getting shot at (or some did) so make sure you protect it.

Speaking of advisors...it may well be worth it to hire an investment advisor. I used to think that was a bad idea because my only experience was with the USPA/IRA ripoff artists I met when I first came into the USAF. However, the value of a good advisor became clear to me when I had more money to invest and my investments had become cumbersome (not something I'm particularly good at or interested in or have time for). Think of it this way...You're paying someone no matter how you invest. No one invests for free.

It became obvious to me that it was worth it to pay someone else to keep track of my money

and give me advice. The type of broker and the way they get paid is important for you to consider. I went with a buddy I played football with in college. He is more than happy to help me and he waives all sorts of costs/fees out of respect for my service. He also says it is in his best interest long term to make me really wealthy. It was the best move I ever made and it started paying off immediately.

BL, a young person today should be able to get to 20 years and be in an excellent position if they are willing to take full advantage of the investment tools offered to them.

Technique only...drive a POS car now and have your kid's college squared away, a nice house, a vacation home and early retirement options later.

[Guest KoolKat]

Originally posted by C-21 Pilot:

When they begin to match will be the day that I join the TSP.

:confused: Where are you putting your $$ after your IRA is maxed? You must know something I don't know...care to share?

BENDY

[Guest rumblefish_2]

Max out your Roth IRA.

Pay off your car(s) ASAP.

Buy a house, build equity.

Do these things now.

[Guest C-21 Pilot]

"Where are you putting your $$ after your IRA is maxed?"

No where really - it's how we live. It's a matter of investing my wifes income and the remainder of mine. The #'s below don't reflect our current situation (who cares anyway), but makes the math easier.

Owning a family business, we can invest in our own 401K thanks to the recent tax law created by the Economic Growth and Tax Relief Reconciliation Act. Say she makes $100K annually before taxes - with a Solo 401k she could contribute 15k + 20k = 35k at the same 100k income. We also catch *some (not all)* of the same tax benefits that the TSP offers since we are in the military.

TSP is great...I used to do it...but with an individual 401k you usually can contribute more into it and you can have a loan. You can not have a loan with a TSP. I stopped the TSP about 3 years once the EGTRR was presented...

For those folks who have spouses that own a business:

The Solo 401K is a great choice which could allow your wife to stash up to 40K+ and get a tax deduction. Also availble now, is the Solo Roth 401K which may even be better. Since on paper she owns 99% of the business, and I own 1%, we have a Solo 401k and will have 2 participants...me and my wife. We both can maximize the account ($15K, and do matching contributions. In 2005, according to the Economic Growth and Tax Relief Reconciliation Act of 2001, the maximum is the lesser of 100% of compensation or $42,000 per person. We have 2 folks contributing at various percents.

I know I'm going out of bounds with this topic, so I'll stray back...

Bottom line, it's suits our financial plan better for us to invest into our max out our Solo 401K -

The TSP is great and I recommend it to the younger troops. I simply won't invest in it (yet) until matching contributions are met (ever).

Some people say you have to be careful if you think you might be in a higher tax bracket when you retire. I would suggest you not worry about that. The laws of compounding will allow you to make more money (pre-tax and free of tax while it grows) if you start with more money. Most people should be more sophisticated investors once they hit retirement and it is likely you will be able to offset your tax issues.

Agree 100%...and thanks for sharing that Rainman - but, read below.

I had this saved on my hardrive about the TSP...IMHO, it really validates my I go thru the ROTH IRA first...

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It’s almost that time of year when you need to start considering taxes. And the government is going to make its final push to get you enrolled in the Thrift Savings Plan (TSP). But there’s one thing they’re not telling you: This is a bad deal for anyone under 50 years old and could cost you more than $290,000 in cash you’ll need in retirement.

I know someone at the family center is going to harp on the benefits of reducing your tax bill now while saving for retirement; but if you’re not saving more than $5,000 per year towards retirement, that TSP isn’t doing you any good.

Here’s why. The TSP is a tax-deferred account. That means the contributions you put into the account will be deducted from your pay before taxes are taken, similar to when you had to put money into your GI Bill. As a result, if you elect to put $100 in your TSP account each month, only about $80 will be deducted from your take-home pay.

That may sound like a pretty good deal, right? It’s not. The TSP is a tax-deferred account, which means quite a bit to your retirement. In fact, if you’re 35, have no retirement savings, and plan on investing $5,000 per year toward retirement over the next 30 years, reasonably, you could be sitting on a nice nest egg of about $1.14 million when you turn 65.

But remember, you followed the advice of the government and contributed to the tax-deferred account. Fast-forward 30 years: You’ve completed your military career and another career and it’s time to enjoy the fruits of your labor, all 1.14 million of them.

But you signed up for the TSP. Now you have a giant tax burden that you’ll need to pay off as you tap that $1.14 million you worked so hard to save. To access that full amount, you’ll need to pay the government about $290,000 in deferred taxes. And when you’re retired and have to live off a meager Social Security check (if it’s not bankrupt), you’ll definitely notice that $290,000 is missing.

That money will be the difference between having a beach-filled travel retirement rather than one spent waiting in line at discount warehouses and choosing between paying the gas bill and going bowling.

Don’t worry, though. There is a way to avoid this huge tax burden and that’s to open a Roth Individual Retirement Account (IRA) account. A Roth IRA has special features that will prevent you from building up a $290,000 tax bill. Instead of being tax-deferred like the TSP, a Roth IRA is tax exempt.

When you go to cash in your $1.14 million nest egg that’s held within a Roth IRA, there will be absolutely no taxes to pay. The entire value of the investments in the account is yours to keep. The government gets no part of it.

The unique tax treatment offered by the Roth IRA will cost you a little bit more. If you’re going to put in the $5,000 max, it’ll cost you an extra $80 each month. That cost is going to go directly to paying taxes you were going to pay anyway. So when I use the term “cost,” I use it very liberally.

Almost every brokerage offers Roth IRAs. Each major online broker including TD Ameritrade and E-Trade and full-service brokerages like Merrill Lynch all offer pretty much the same deal. All it takes to start one is to fill out a small form and fund the account. Competition is so heavy in the brokerage industry, they’ll even have somebody walk you through the whole process and answer any questions you have. When it comes to starting a brokerage account, it’s certainly a buyer’s market right now.

One final benefit to opening a Roth IRA account is that the account minimums are so much smaller. A full-service brokerage like Merrill Lynch or Morgan Stanley will normally tell you to get lost if you can’t write a check for $10,000 your first time in their office just to open a regular account.

When you start a Roth IRA you can usually fund it with less than $100 if you use an online discount broker. They also have no annual fees to have the account open and much lower commissions to pay when making investments.

Now, they’ll even manage the money for you and offer the same investments the TSP does. The G, F, C, S and I funds are all offered by brokerages. They may have different names, but the funds have the exact same performance as the TSP funds.

Opening a Roth IRA will also give you one more advantage: It will allow you to pick and choose the stocks you want to so you’re not stuck with the different TSP options that all failed to earn just 10% on average per year over the past 10 years.

To prevent growing a huge tax liability, it’s imperative to max out your Roth IRA before contributing one dollar to your TSP account. This will help make your retirement a much more comfortable one and will ensure when you retire, you actually retire.

Andrew Mickey

USAF Veteran

Editor in chief, BreakAway Investor

[ 14. January 2007, 21:56: Message edited by: C-21 Pilot ]

[addict]

Unfortunately that Mickey is full of it when it comes to complaining about that $290,000 bill of a regular IRA...

...Given a constant tax rate, a Roth IRA and regular IRA with equal performance produce exactly the same amount of money.

It is the relative taxation between now and retirement that dictates what is most advantageous (marginal taxation on last dollar, not overall). If you think that by the time you're 65 you'll be pretty damn good at cooking up deductions... regular IRA. Maybe you think taxes will go up... But what Mickey doesn't get is that that enormous tax burden is just the same as it was on the input side.

[ 14. January 2007, 23:00: Message edited by: addict ]

[Guest Rainman A-10]

And the taxes you didn't pay grow at a compounded rate. Think of it like you are taking a loan from the govt, investing it and then paying it back later...maybe.

Solo 401Ks are great, if your wife sells Arbonne . But doesn't that fly in the face of Mickey's anti pre-tax income investment philosophy?

[Guest C-21 Pilot]

Agree...but it does play an arguement for *both* claims though.

The key to all investing w/ the Roth, is exactly what you stated - *constant* tax-rate. I like everyone, hope one day to move on up to the delux apts in the sky. Therefore, the $290K arguement does become a factor (IMHO).

All about roll over my friend.

-Cheers

[Guest Rainman A-10]

Don't get me wrong, Roth IRAs are great as long as you are eligible.

I can't invest in a Roth anymore but I am always looking for a way to reduce my current tax liability.

[Mitch Weaver]

How about two Roth IRAs (one for self, one for spouse) vs Roth IRA and a TSP account?

[HerkDerka]

WTFO, are cheap booze and cheap hookers no longer a sound investment? I guess I need to cancel my account from Bender Financial Solutions.

HD

[Guest KoolKat]

Disregard. Bender Financial Solutions does not advocate the consumption of cheap booze. However, over time it has been proven that cheap hookers taste almost identical to the pricier models with all their teeth, therefore are still a sound investment.

Although Roth IRAs are a good way to save for retirement, one must always remember to "pay yourself first."

BENDY

[ 15. January 2007, 05:58: Message edited by: Bender ]