07-15-2012 07:37 PM - edited 07-16-2012 08:56 AM
I have about 400-500/ monthly that I can save. Should I put it in a 401k thru a credit union or roth ira . Little background info.
I am 29 almost 30..no current 401k and not working presently either and do not know when I will be working again. So I will miss out on an employer's match( free money)...I am researching now but am having a tough time making a choice.
PLease list where you think I should put it and why
07-16-2012 10:12 AM
I don't think that you can do a 401K pre-tax without earned income. But in any case at your age a Roth IRA makes a lot more sense for a variety of reasons. It allows the money to grow without tax consequences so all of your future withdrawals including gains are tax free. And in the event that you need to withdraw any portion of it in the future before retirement age you can always access that portion which was your contributions without tax consequences. A hardship withdrawal from a 401K will trigger your standard tax rate plus a 10% penalty under the current tax code.
Obviously none of us can guarantee what the tax code will be in the future so you simply have to work with what's available now. As to where to put the money I would do a lot of reading on investments and / or talk to someone with a lot of experience whom you trust (parent / friend etc.) or you could find a fee only financial adviser and get some advice. Be wary of commissioned brokers and financial advisors as they do not always have your best interest at heart but are looking at their best commission opportunity. I'm not suggesting they are all bad people but you are taking your chances in choosing one at random.
07-16-2012 10:36 AM
Thanks so much for the advice. Now you stated " you could find a fee only financial adviser and get some advice. Be wary of commissioned brokers and financial advisors are you speaking of financial advisors that are not fee only?
I was thinking on asking my uncle as well.
07-17-2012 10:41 AM
Since you are not "working", building up savings in an account that you can access if you need to is a wiser choice. It can help balance out cash flow and is an asset you can list if you need to show your financial situation.
07-17-2012 10:47 AM
If you have absolutely no savings, I'd much rather build up something that is a lot more liquid, just in case.
Although it does seem that you are "blessed" in that you are saving up a lot more than you are spending.
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