IRAs are for Real Investors

Anyone who gets a good job with benefits can fill out some paperwork to join the 401K or 403b plan. It's the people who go out of their way to set up their own IRA who impress me. With a Traditional or Roth IRA, no one is helping you. It's just your decision to set some money aside for your retirement. Should you start a Roth IRA or a Traditional IRA? Ask your accountant--don't just wing it. For now, know that the Traditional IRA gives you a tax break now, while the Roth gives you a tax break only in retirement. Whether you can use one or the other depends on your income level and whether you're already in a retirement plan sponsored by your employer. If you make a healthy six-figure income, forget the Roth contribution--it isn't happening. If you make that kind of money and are also in a retirement plan through your job, you also won't be able to deduct what you put into your Traditional IRA, so you can pretty well forget that option. The IRAs I'm talking about here are really for people who are starting to make a decent salary, but not absolutely killing it. If you are in a plan through your employer, your ability to deduct your contribution to a Traditional IRA will be phased out in the $56,000-$66,000 range for single filers and $90,000 - $110,000 for married couples filing jointly. If that describes you, your accountant will likely tell you to put your contribution into a Roth IRA. If you're not in a plan through work, you can deduct your contribution to the Traditional IRA, so, if your accountant agrees, put your money there. If your income level plus your participation in a company plan means you can only deduct part of your Traditional IRA contribution, you might want to contribute only that much and then put the rest into your Roth IRA. But, once your income rises to the healthy six-figure range, your days of making Roth IRA contributions are over. Max out your employer-sponsored plans and then either consider an annuity or--my favorite--just opening a regular, taxable brokerage account, where there are no limits on anything, really. Doesn't matter what your income is, doesn't matter how much you want to put into the account, and there's never any weird requirement to wait until your 59 1/2 or to start taking out funds at age 70 1/2 (what's with the half?). Just fill out some paperwork, fund your account, and invest in whatever you want through TD Ameritrade, Charles Schwab, etc.

However they do it, people who start their own IRA or taxable brokerage account are called "self-directed investors." Does that sound like you? All it takes is a little bit of knowledge, and a little bit of money that you can afford to set aside. Get the E-book Now