Where to open a retirement account?

hamsterdance · May 2013

Neither of my current employers offers any kind of retirement savings. I am planning to start that when I get paid tomorrow. Where? How? Roth or Traditional? Is there any good company that doesn't have a high minimum to start, or should I put it in savings until I have more?

bparkhur · May 2013

I would recommend a Roth until you are able to max it out ($5000 a year). I use Vanguard ($3000 minimum to open). I know there are some out there that don't require such a large minimum, perhaps some others can chime in?

bparkhur · May 2013

And go you for taking the plunge!

brij2006 · May 2013

Good job at taking the bull by the horns and getting yourself set up.

My first account was a Roth IRA through New York Life. My employer also doesn't offer any retirement. Although we do 10% into H's 401k, because his employer offers it. If your H has that option, be sure to take advantage of that too. Especially if they match it.

hamsterdance · May 2013

I asked DH and he is currently putting 6% into his 401k. He thinks they match 100% to the first 3% but he's not totally sure. He also has it set up to automatically increase by 1% a year.

bparkhur · May 2013

Usually your best bet is to invest in an employer-offered plan up to the match and then start investing in a Roth. So if your husband's employer matches up to 3%, invest 3% and put the rest in a Roth.

Another example, my husband's company matches 50% up to 10%, so thus he invests 10% because we don't want to waste any "free" money. He has a Roth too, but were currently only invest $100 a month. If his employer matched 100% up to 5%, we would invest 5% in that account and then put the other 5% in a roth. You can have your employer send it to your account automatically so that you never see it.

hamsterdance · May 2013

OK. That information helps.

CuriousKiddosMama · May 2013

You can also check with your bank- often they will have financial advisors on staff who can help you open a ROTH IRA. I have heard about minimums as little as $1000. They can probably also set up a direct transfer from your checking to the retirement account every month if you want to help you keep on track.

athlete010688 · May 2013

bparkhur:

Usually your best bet is to invest in an employer-offered plan up to the match and then start investing in a Roth. So if your husband's employer matches up to 3%, invest 3% and put the rest in a Roth.

Another example, my husband's company matches 50% up to 10%, so thus he invests 10% because we don't want to waste any "free" money. He has a Roth too, but were currently only invest $100 a month. If his employer matched 100% up to 5%, we would invest 5% in that account and then put the other 5% in a roth. You can have your employer send it to your account automatically so that you never see it.

Why is this?

I'm asking because DH has a 401K through his place of employment. Basically they contribute 50% up to 4%. For the first year, he was putting in 4%, and they were contributing 2%. They way that 401K is set up is that it automatically doubles each year until it reaches 10%. So, this past May, his contributions jumped to 8%, while employer contributions remained at 2%. Next May, his contributions will go to 10%.

Apollo11235 · May 2013

Can you opt out of the doubling plan? If so, I'd do this.

Assuming your income is low enough to qualify, Roths are better (from what I've heard) because you deposit the money after tax, then it grows tax-free, and you can withdraw at retirement age, also tax-free. So you pay what's probably a lower tax rate (while you're younger and in a lower tax bracket), and you only pay tax on the principal that you deposit. You do still want to contribute up to your employer's max for matching (4% for your H), since the free 50% extra wouldn't be smart to pass on. But beyond that initial bit that they match, a Roth will make your money work better for you.

ETA: whoops, this was supposed to quote the post above it.

CuriousKiddosMama · May 2013

athlete010688:
bparkhur:

Usually your best bet is to invest in an employer-offered plan up to the match and then start investing in a Roth. So if your husband's employer matches up to 3%, invest 3% and put the rest in a Roth.

Another example, my husband's company matches 50% up to 10%, so thus he invests 10% because we don't want to waste any "free" money. He has a Roth too, but were currently only invest $100 a month. If his employer matched 100% up to 5%, we would invest 5% in that account and then put the other 5% in a roth. You can have your employer send it to your account automatically so that you never see it.

Why is this?

I'm asking because DH has a 401K through his place of employment. Basically they contribute 50% up to 4%. For the first year, he was putting in 4%, and they were contributing 2%. They way that 401K is set up is that it automatically doubles each year until it reaches 10%. So, this past May, his contributions jumped to 8%, while employer contributions remained at 2%. Next May, his contributions will go to 10%.

You want to contribute what your employer will match because that is 'free' money that will earn interest and stay in your retirement account so long as you are vested before you leave the company.

You want to contribute the next bit to a Roth IRA because those are tax free when you take the money out at retirement- with a 401K you pay the taxes when you withdraw in retirement. So therefore, get the free money from your employer, and then let your money grow tax free in the Roth.

kasi55 · May 2013

hamsterdance:
Neither of my current employers offers any kind of retirement savings. I am planning to start that when I get paid tomorrow. Where? How? Roth or Traditional? Is there any good company that doesn't have a high minimum to start, or should I put it in savings until I have more?

To the OP, I opened my first IRA account with T. Rowe Price because of the low starting amount required. You did not need a large initial balance, the requirement was that you deposit at least $50 per month automatically.

I'm not sure if it's changed, but it's worth checking out.

athlete010688 · May 2013

Vikingsfan 71713:
athlete010688:
bparkhur:

Usually your best bet is to invest in an employer-offered plan up to the match and then start investing in a Roth. So if your husband's employer matches up to 3%, invest 3% and put the rest in a Roth.

Another example, my husband's company matches 50% up to 10%, so thus he invests 10% because we don't want to waste any "free" money. He has a Roth too, but were currently only invest $100 a month. If his employer matched 100% up to 5%, we would invest 5% in that account and then put the other 5% in a roth. You can have your employer send it to your account automatically so that you never see it.

Why is this?

I'm asking because DH has a 401K through his place of employment. Basically they contribute 50% up to 4%. For the first year, he was putting in 4%, and they were contributing 2%. They way that 401K is set up is that it automatically doubles each year until it reaches 10%. So, this past May, his contributions jumped to 8%, while employer contributions remained at 2%. Next May, his contributions will go to 10%.

You want to contribute what your employer will match because that is 'free' money that will earn interest and stay in your retirement account so long as you are vested before you leave the company.

You want to contribute the next bit to a Roth IRA because those are tax free when you take the money out at retirement- with a 401K you pay the taxes when you withdraw in retirement. So therefore, get the free money from your employer, and then let your money grow tax free in the Roth.

I should have added - his is a Roth 401K...does that make a difference?

He has a Roth 401k and contributes 8% and his company contributes 2%.

I have a Roth 401k and contribues 4% and my company contributes 2%.

I also have a Roth IRA and contributes $75 a month (which is equivalent to 2.3%)

Where to open a retirement account?

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