I’m 50 years old. I have a state pension that will pay 2/3 of my salary for life. I also have $40k in a stock account. My wife has $60k in her Roth IRA, which we max out yearly. I contribute $350 a month to my stock account. Should I stop contributing there and open a Roth IRA for myself instead? I plan to retire in about 5 years, then work part-time while collecting my pension.
Stop putting money into the stock account and use it for a Roth IRA instead. You’ll avoid capital gains taxes in the Roth. Just remember there’s a $7,000 yearly limit, but $350/month fits within that.
Ember said:
Stop putting money into the stock account and use it for a Roth IRA instead. You’ll avoid capital gains taxes in the Roth. Just remember there’s a $7,000 yearly limit, but $350/month fits within that.
Thanks, that’s what I was thinking. I’ll stop adding to the stock account and open a Roth. I heard I can’t move my current stock account into a Roth, so I was thinking of buying VTV, VTI, or VOO for the Roth.
@Quinlan
Open the Roth now to start the 5-year clock. If your stock account is taxable, consider selling $8k of it (more to cover taxes if needed) and using that to fund your Roth.
Harlem said:
@Quinlan
Open the Roth now to start the 5-year clock. If your stock account is taxable, consider selling $8k of it (more to cover taxes if needed) and using that to fund your Roth.
Good advice. Also, if you have losing stocks, sell those to offset gains and minimize taxes on the $8k you move.
@Quinlan
Forgot to mention, we already max out her Roth every year.
Quinlan said:
@Quinlan
Forgot to mention, we already max out her Roth every year.
Since you’re 50, you can make catch-up contributions of an extra $1k per year. Same goes for your wife’s account if she’s eligible.
The big benefit of a Roth IRA is tax-free growth and withdrawals in retirement. If you retire with $150k in your Roth, you could pull out $50k to buy something like a fishing boat without worrying about taxes. That’s why it’s such a great option.
A Roth is way better than a brokerage account, especially if you’re retiring soon. Skip the taxes.
As you get closer to 59.5, retirement accounts feel more like regular accounts. Pre-tax accounts are often better than post-tax ones if you’re maxing contributions. But this depends on how much income you expect in retirement vs. now. You can use calculators like this: Calculator: Roth 401(k) vs Traditional 401(k) to compare. If your income drops when you go part-time, it might be worth shifting more to a Roth. Also, keep an eye on things like health insurance caps or student aid if relevant.
Put that $350/month into a Roth instead of the stock account.
Sky said:
Put that $350/month into a Roth instead of the stock account.
What does Roth mean?
Sky said:
Put that $350/month into a Roth instead of the stock account.
What does Roth mean?
Really Obvious Tax Haven.
Sky said:
Put that $350/month into a Roth instead of the stock account.
What does Roth mean?
It’s named after Senator Roth, who helped create it.
Sky said:
Put that $350/month into a Roth instead of the stock account.
What does Roth mean?
Just Google it.
Sky said:
Put that $350/month into a Roth instead of the stock account.
What does Roth mean?
I know what it is. Just wanted to point out that people toss these terms around without explaining them.
Yes, definitely open a Roth. It’s tax-free growth, and you’ve got at least 15 years to add to it.
Anyone earning income should open a Roth as soon as possible, even with a small deposit. The 5-year waiting period starts immediately, so it’s better to get that going now.
Kade said:
Anyone earning income should open a Roth as soon as possible, even with a small deposit. The 5-year waiting period starts immediately, so it’s better to get that going now.
I moved to the U.S. later in life and make too much to qualify now.
@Hollis
Have you tried the backdoor Roth method?