#RothIRA #Investing #RetirementPlanning
##### What is a Roth IRA and How Does it Work?
A Roth IRA is a retirement account that allows individuals to contribute after-tax income towards investments that grow tax-free. Unlike a traditional IRA, withdrawals from a Roth IRA are tax-free, making it an attractive option for long-term retirement savings.
##### Benefits of Investing in a Roth IRA
– Tax-Free Withdrawals: Any earnings in a Roth IRA grow tax-free and withdrawals in retirement are not subject to taxation.
– Flexibility: Unlike a 401(k), you can withdraw your contributions penalty-free at any time.
– Diversification: Investing in a Roth IRA allows for a diverse range of investment options, including stocks, bonds, and mutual funds.
##### Why Your Boyfriend Might Be Hesitant
Your boyfriend may be hesitant towards Roth IRAs due to his belief that he can earn better returns through a family broker. Some common misconceptions that might influence his viewpoint include:
– Fear of Locking Up Money: While Roth IRAs have contribution limits and penalties for early withdrawals, they can still provide a tax-efficient way to save for retirement.
– Lack of Control: Your boyfriend may feel that investing with a broker gives him more control over his money. However, with proper investment education and planning, a Roth IRA can be a valuable addition to his financial portfolio.
##### Presenting the Facts
To help change your boyfriend’s mind, you can present him with the following information:
– Long-Term Growth: Show him the benefits of compounding interest and tax-free growth over time.
– Tax Advantages: Illustrate how tax-free withdrawals in retirement can save him money in the long run.
– Retirement Planning: Emphasize the importance of starting to save for retirement early and taking advantage of employer 401(k) matches.
##### Conclusion
While your boyfriend may have valid concerns about Roth IRAs, it’s important to consider the long-term benefits and tax advantages they offer. By presenting him with factual information and engaging in open discussions about financial goals and strategies, you can help guide him towards making informed decisions about his financial future. Remember, everyone’s financial situation is unique, and it’s essential to tailor investment strategies to individual needs and preferences.
He obviously doesnt understand what “saving for retirement” means.
at a certain point, it doesnt matter what you do. theres no convincing some people.
no, you are right. but its not really any of your business as long as he is your boyfriend and not your husband.
if someone is saying something as dumb as that they dont “believe” in IRAs, then odds are you wont change his mind with logic, because he didnt use logic to come to his existing position.
Traditional pre-tax contributions have hard math and guesswork.
Roth has easy math. You can invest however you want, and you don’t pay taxes on growth. The comparison is anything else, where you do pay taxes on growth. Any taxes cost more than no taxes, so Roth is strictly better than taxable brokerage.
>What information/facts/data can I present him to change his mind?
Not paying taxes on growth > paying taxes on growth.
Maybe you should educate him that Roth IRA money is not locked up. You can actually withdraw money you contribute anytime without tax or penalty. The growth of your contributions has to stay in the account until you are 59.5 and the account has been open for at least 5 years.
Also, you might mention to him that out of the over 3,000 mutual funds managed by “professionals” not a single one – not one beats a simple S&P 500 index fund over 30 years. Check the NY Times article on this.
Too bad your bf is missing out on one of the single best investment vehicles (maybe the best) in existence. Are you sure you want him to be your bf? Sounds like you can do better.
I imagine his “family broker” shares the same view
You’re not going to change his mind. When your portfolio does better than his, (and make sure its somewhere like Schwab/Vanguard/Fidelity for lower fees) then he can come to you and ask why.
You can invest any way you want in a Roth, you just don’t need to pay taxes. He seems to be confused. Does he like paying taxes?
Please provide the school he just graduated from, so that we can protect our progeny from whatever atrocious education he received.
I don’t understand how morons like this make 100k straight out of school. You don’t need our advice, I’m sure he’ll just fail upward his entire career.
The tax savings makes it way worth it. I feel bad for his clients.
How does a finance graduate not know things that 5 minute YouTube videos explain?
You can invest in pretty much anything
I doubt his “family broker “ beats the market long term after fees
Also it’s not “locked up”
You can liquidate your retirement accounts anytime you want, there’s just fees and penalties for early withdraw of earnings from a Roth. Contributions can be withdrawn penalty and tax free at anytime.
If between a degree in finance and the amount of information available on this topic still can’t figure out that passive investing has been superior to active management over recent history, then wow. I’d feel a bit differently if he thought he had some kind of esoteric strategy that could outperform passive flows going forward, but suggesting the family broker is pretty lame. Not understanding tax-advantaged accounts in finance is hard to comprehend.
He automaticaly gets an extra whatever-percent return by using a tax advantaged account. The family broker isn’t going to beat that total return.
Markets crash. A lot more often lately.
I mean ‘not believe in them’ – thats a bit strange. I could understand not ‘believing’ in them over traditionals 401ks. But to say no one should ever use them at anypoint is weird
Doesn’t believe in them? Like they’re the tooth fairy? Maybe your boy is just a true patriot and wants to pay a lot of taxes?
In reality his parents likely steered him to their advisor, who’s taking a nice commission on high fee funds or a percentage of assets managed.
it is retirement money why wouldn’t want it lock up? he can invest Roth money same as his taxable.
Begs the question, will he use the same logic in other areas of your relationship? How much energy will you have to put in to convince him that Huggies are superior to Pampers?
Your BF is not completely wrong.
There is a lot of missing information, but retirement accounts do have penalties for pulling money out. If he’s planning to die before retirement, he’s right.
But it’s stupid to think this way. What makes a Roth IRA a Roth IRA is the tax breaks. If he doesn’t understand the tax breaks, he will probably never understand them, and just let him do whatever he wants. You only really need to put your foot down if you plan to marry the guy.
Let him try with his broker.
If he’s self managed he will likely underperform the market.
If he’s using a paid advisor he’s going to pay a lot of fees and still underperform the market.
Roth or not, you can invest in whatever you want, so that doesn’t make sense. My vanguard Roth can hold stocks, ETFs, etc. it’s just a tax strategy.
Your bf doesn’t know what he’s talking about. Investments can be made in a Roth IRA, with tax advantages his brokerage doesn’t have.
Family broker to me says he is planning to inherit his retirement. Please be smarter than your bf. Save early and save often.
Be smarter than your bf. Save early and often and invest in broad market funds. This is literally the advice of Warren buffet.
He is planning to inherit his retirement Tell him to look at the fee disclosure of the family broker and then he might like VTI better.
Family broker says it all….imagine an idiot like this working in finance. He needs to max out those plans THEN play with investing.
Your bf is a dunce. Tax advantaged accounts are a beautiful thing.
Your bf scored lowest in his class ..huh?
Luckily there’s a family broker..
Lucky there’s a man who
Positively can do
All the things that make us
Retire mediocre
I can see it if ones goal is to retire early. But then at the same time, it should be no brainer to just max out Roth then put everything else in some other form of investment.
He can make all the same investment choices in an IRA/Roth IRA – he can even let his family broker continue to manage the money for him.
He’s right that his money will be tied up. But the benefit is that it grows tax free.
There’s no reason not to do both – invest in a taxable and tax deferred/tax free accounts. In fact he probably should.
House, large purchase, pre-retirement retirement – goes into taxable accounts. Post retirement funds goes into tax advantage savings.
The best way to look at it, is that It’s an extra 30% on top of what-ever he makes from his broker. I.e. it’s either 22-30% saving when he puts it in (traditional IRA) or takes it out (Roth IRA).
Just remind him he needs 30 years of post-retirement funds and he’s better off if his investments are making him 30% (between 22-30% depending on tax bracket) more.
I don’t blame him – my parents told me both Santa and Roth IRAs didn’t exist when I turned 10.
He’s only your boyfriend let him make his own decisions.
Retirement accounts are tax advantaged. He doesn’t need to just slightly beat the market. He needs to significantly beat the market to make up for the 15-30% haircut he’ll take annually from short-term gains taxes. If anyone could consistently beat the market like that they could just do it with leverage and become a literal billionaire.
Please ask him the name of his broker that has beaten the market for any 10 year period… cuz warren buffet owes that guy a million dollars.
His family stock broker might even have his money in a Roth IRA account and he just doesn’t know it. Nothing annoys me more than so called “finance” professionals who are delusional and goes against the facts and data. I’d vote for you to dump the dude lol.
Roth IRA:
– Zero tax if you withdraw after 59.5 yrs old. Your 1k could be 10mil in 30 yrs and Uncle Sam can’t claim any parts of that
– If you need to withdraw what you put in, you also pay zero tax. You can leave your gains to grow at no risk to you.
– If you need to withdraw more than what you put in, you’ll get tax 10% on your gains, vs 15% or more on a regular broker’s account.
> What information/facts/data can I present him to change his mind?
Realistically? You probably *can’t* change his mind.
I don’t know how serious your relationship with him is, but I’d recommend not marrying someone whose financial philosophy is so completely different from your own. Years or decades down the road, that is gonna cause real problems.
Does he work for schwab? Just wondering if I need to move my brokerages to a different institution. Let me know! Thanks!
A recent grad is most likely to be stubborn and close minded. You probably won’t convince him of anything