Now that I’ve reached several other financial goals in the last couple of years (paying off credit cards, saving for our home together, and saving for our wedding), I’m ready to set up a Roth IRA. While I’ve enjoyed having inputs into James’ stock investments and our own smaller joint portfolio, I’m looking forward to watching mine grow.

Okay, so I know a bit about Roth IRAs, but I’m certain no expert. This means that we can either learn together, or you can leave comments of tips of what I might be missing. To start the ball rolling, I just got back $2,500 plus interest for a first time home buyers credit. :-)

Some history of the Roth IRA:

  • The Roth IRA was developed as part of the Tax Relief Act of 1997
  • It has become a popular retirement and estate-planning tool among U.S. taxpayers
  • Roth IRA ownerships in American households have increased to 16 million as of June 2003, keep in mind that individuals earning more than $110k or married folks with more than $160k aren’t eligible for a Roth IRA. (James comments that it must be a good deal if they are putting restrictions on it.)

Things to keep in mind with a Roth IRA:

  • There are specific tax benefits because you pay tax now rather than on your earnings later down the road, so gains on your investments are never taxed.
  • Keep in mind that contributions aren’t tax deductible, so watch out for the tax man.
  • I’ve also read that there are various ways to get money out before retirement age, so it’s not a bad option for younger investors. Some examples are higher education, medical expenses, first time home buying. Here are some tips on how to do so wisely.

Outrageous finds:

  • My apologies, the comment below in italics actually seems to be incorrect. My source was investopedia, but it seems from several comments that gave links to the irs, that there is no longer a difference in contributions if you are married. My apologies! Thanks for comments!
  • The most disconcerting find was that as individuals we could each save $4k in a Roth IRA, whereas now being married filing jointly, we can each only contribute $3k. Imagine, a $2k penalty just for being married! I’m certain you’ll hear us ranting more at tax time!

I’ll keep you posted on my progress!

I welcome your feedback, tips, or experience you have.

Miel

MANAGE YOUR MONEY TOGETHER

Here are some simple guidelines for DINKS to build wealth:

1) Collaborate: Meet regularly to talk about money, set goals together, track and monitor them.

2) Understand and respect your partner. Take time to understand your partners values about money.

3) Watch the numbers. Get a budget, monitor your spending and track your net worth.

4) Max your retirement. Maximize contributions to your tax deferred retirement accounts.

5) Invest in stock. Stocks perform better than bonds or cash.

6) Avoid high interest debt. Credit cards and title loans are financial cancer.

7) Diversify. Don't put all your eggs in one basket.

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