Last week, several people who write on my blogroll discussed the value of a Roth IRA. It’s tax-free! It’s savings! It’s the best thing since sliced bread!
The bottom line to most of the articles I read was: listen here, bucko, it’s time to start saving for retirement, and you should open an IRA and if you’re not already saving for retirement I hope your mind and body stays active well into your 80s because you’ll never retire ever.
Gloom and doom aside, I learned a lot about IRAs, particularly Roth IRAs last week.
But I didn’t learn about how I can benefit.
Here’s my situation. Once upon a time, I worked for a company that matched 401(k). Then another. Then another. After that, I had three different accounts in three different areas. Fidelity was one of them, and they said, “hey, roll everything into an IRA and start making automatic contributions.” I did, and completely put it out of my mind.
Every month, $200 would go into Fidelity. That’s not enough to max out in any given year, but it was certainly something. I didn’t even really remember it until I signed up for Mint.com, and realized I had more than $10,000 saved up. Good job, me!
The IRA I’m contributing ($400 a month now!) is a traditional IRA. I pay taxes on it, I think. At least I type that information into the tax software know-it-all.
But these blog posts, while informative, drew more questions.
- Can I have both a Roth and a Traditional?
- If not, should I roll my traditional into a Roth?
- If so, is the maximum amount I can contribute $5000 total, or $5000 for each fund?
- How on earth will I ever be able to retire when I’m only contributing $5000 a year to my IRA?
If I can only contribute $5000 a year total, then once I max out, I should really try to invest in something else with an acronym, right?
Goodness gracious. Once my debts go away, I’ll revisit this can of worms.
In the meantime, can anyone answer my questions?