Convince my H I should open a ROTH IRA

[littlemisssunshine]

I'm self employed and have casually talked about wanting to save for retirement. As a New's Year resolution I wanted to finally do it, and started setting it up with Vanguard (we have mutual funds with them as well as H's 401k through his work.) H freaked out thinking it wasn't the best decision, that our regular savings were fine for us and there was no reason to have a account solely for retirement.

H makes 60k and saves 13% of his income in his 401k, is 27 and currently has 23k in his 401k account.

I'm 25, own a property management company making 45k(ish) a year. No retirement savings. We have no debt, save for our 15 year mortgage at 2.875%. We have 34k in mutual funds which is our regular savings (ie efund, new car fund, whatever comes up). We also have another 52k in stocks that have no real purpose. We usually save about 1.5k a month and just dump that in our mutual funds.

So......is a IRA the best retirement plan for me? Or should I just dump extra money into mutual funds? Please tell me if my H is crazy or not and educate me on the finer points of retirement savings. Thanks!

[littlemisssunshine]

Jan 8, 2013 21:38:50 GMT -5 @songforyou said:

Why does your husband think it's fine for him to a retirement account that he holds individually, but that your retirement savings needs to be held jointly?

I don't necessarily think he's crazy, but I would get the IRA.

It wasn't that he wants my retirement to be held jointly, his point was I didn't need a specific account just for retirement. He would be fine with me opening up a individual mutual fund account. He doesn't willingly contribute to his 401k....he contributes the minimum of 3% and his employer puts in 10% every year as part of their profit sharing. He doesn't see the need for any retirement savings as long as we're saving else where, which extremely frustrating for me.

[LoveTrains]

Does your husband not understand the tax advantages? What you should do is open a Roth IRA.
In your Roth, you will deposit after tax dollars. When you sell the stock and withdraw the money in retirement, you pay NO CAPITAL GAINS OR INCOME TAXES on the money you withdraw. That is huge.

If you put money into just a regular account, when you sell the stock you will have to pay capital gains taxes. You will save 15% (or whatever the capital gains rate is at the time) on all of the gains in your account by putting into a Roth IRA. That could be hundreds of thousands of dollars of savings.

[littlemisssunshine]

Jan 8, 2013 22:00:58 GMT -5 @songforyou said:

So wait. This guy (I call my own husband that so no offense meant) is only enrolled in his own 401k by force and you're taking retirement advice from him? This is what I call the blind leading the blind. You'd better open your IRA and stop listening to that dude.

Heck no! I'm definitely setting up some type of retirement account this weekend. We've agreed to meet this weekend to discuss saving goals, and what to do about retirement. I simply want ammunition when I talk to him about retirement savings. I've already brought up the tax free growth, is there any other benefits of retirement savings vs regular?

[insominac]

Lol song
Open up your own Roth. Hell, he should open up one too.

[pitterwoo]

Jan 8, 2013 21:23:39 GMT -5 littlemisssunshine said:

I'm self employed and have casually talked about wanting to save for retirement. As a New's Year resolution I wanted to finally do it, and started setting it up with Vanguard (we have mutual funds with them as well as H's 401k through his work.) H freaked out thinking it wasn't the best decision, that our regular savings were fine for us and there was no reason to have a account solely for retirement.

H makes 60k and saves 13% of his income in his 401k, is 27 and currently has 23k in his 401k account.

Financially you are both making some great decisions and are way ahead of lots of people your age, so I do want to give you credit for that. However, the bolded is your issue. Retirement is a great thing to save for. Every year. Start now. There's no reason for you to just be casually thinking about it for someday.

As Trains said, the huge tax advantage for you with the Roth will be that all the money that grows in that account will be taken out tax free when you retire. You can only contribute about 5k a year, so open one now and throw 5k at it for 2012 (you can contribute for 2012 until April I think) and start adding to it in 2013.

[LoveTrains]

If your H doesn't see the need for retirement savings even when the tax advantages are explained to him, then he is an idiot. Sorry. I don't understand why someone would want to pay taxes on money when they don't have to.

[dexteroni]

Jan 8, 2013 22:08:43 GMT -5 littlemisssunshine said:

I simply want ammunition when I talk to him about retirement savings. I've already brought up the tax free growth, is there any other benefits of retirement savings vs regular?

There doesn't need to be another advantage. The tax-free growth is HUGE. If he can't understand that, I don't see the point in bothering to explain it any further. Just open your account. Congratulations on being smart about this!

[SJ]

Others have already raised great points. Do you think maybe he doesn't understand how much you are taxed on those investments? Where did he get the idea that you shouldn't save in retirement accounts?

I would also recommend that you look into a SEP IRA. You will be able to save more than in a Roth, you get a tax deduction for it, and you still get the tax-free growth.

[phunluvin82]

I would recommend taking the figures for what you already have saved in stocks and mutual funds. Plug that into a compound interest calculator to see what you would have at retirement age.

THEN, calculate how much capital gains tax you would pay on that amount.

Show this to your H. Maybe he is thinking of the tax advantages in abstract and thinking that they are minimal and don't really make a difference.

They are NOT minimal. They make a HUGE difference. Depending on how much you save over the next few decades, we could be taking about a few HUNDRED THOUSAND dollars.

[Deleted]

And not to be a debbie downer, but in the event of a divorce, I think retirement accounts can be treated differently.