#RetirementPlanning #IRA #401k #FinancialAdvice
Starting Your Retirement Planning Without an IRA or 401k
Understanding Your Options
If you find yourself in a situation where you have a high income but are unable to contribute to a Roth IRA due to income thresholds, and your employer does not offer a 401k match, it’s important to explore other retirement savings options. One potential avenue for you to consider is opening a traditional IRA.
Traditional IRA Basics
A traditional IRA allows individuals to make contributions with pre-tax dollars, potentially reducing their taxable income for the year. While contributions to a traditional IRA are not limited by income thresholds like a Roth IRA, the tax implications are different. When it comes time to withdraw funds from a traditional IRA in retirement, those distributions are subject to income tax.
Getting Started
To begin contributing to a traditional IRA, you’ll need to open an account with a financial institution that offers IRA services. Many banks, credit unions, and investment firms provide traditional IRA options for individuals looking to save for retirement.
Benefits of Traditional IRA
– Potential tax benefits through pre-tax contributions
– Ability to grow your retirement savings over time through investment options offered within the IRA
– Flexibility in choosing where to open your IRA account based on your individual preferences and financial goals
Seeking Professional Advice
If you’re unsure about the best approach to take with your retirement savings, it’s always a good idea to seek advice from a financial advisor. They can help you navigate the complexities of retirement planning and provide personalized recommendations based on your unique financial situation.
Conclusion
While not having access to a Roth IRA or a 401k may seem limiting, opening a traditional IRA can still be a viable option for saving for your future retirement. By taking the first step to start contributing to a traditional IRA, you’re already making progress towards securing your financial future. Remember, it’s never too late to start planning for retirement, so don’t hesitate to reach out for guidance and advice as you embark on this journey.
Match on 401k doesn’t matter. Max your 401ks, google “backdoor Roth” to learn how to contribute to a Roth IRA.
> Currently employer does not match 401K’s but hopefully soon as they are looking into it.
So what of employers aren’t matching? You should be contributing to it anyway. You both have the income to max it out.
>So my understanding is no contributions to Roth IRA due to income threshehold (married, filing jointly)
You can do a Backdoor Roth
After you max out your 401k, and Backdoor Roths, then you open a brokerage account and throw more to invest there.
You’re *almost 40*. You’ve lost two decades of compound interest. The only way to make up for time lost in the market to invest huge piles of cash. Max out the tax-advantaged accounts first (401k and Backdoor roth) and then add to brokerage.
It’s better late than never and you two make a lot of money so you can catch up pretty quickly.
You cannot contribute directly to a Roth IRA, but you can do the backdoor Roth IRA process for both you and your wife. Essentially you make a non deductible contribution to a traditional Ira, then convert that to the Roth. This is a known loophole and just ends up creating extra steps for the same results. Also you make too much money to make deductible contributions to a traditional Ira. So open up Both a traditional and Roth IRA for you and your spouse for this process.
Max out both of your 401ks if you can. You are in a high tax bracket so I would do traditional contributions. This will lower your tax bill a lot and will create more investable income.
If you have access and are eligible for an HSA, then max that out as well for a tax break now and tax free growth, we all need healthcare in retirement.
Figure out how much you need in the HYSA for emergencies, typical advice is 3-6 months. Whatever you have above that should probably be taken out an invested. This can go directly to your IRAs or can help you pay bills while maxing out retirement plans.
If you are able to max out 401k, Roth IRA for both you and your spouse, and can max out HSA. Then I would look into a taxable brokerage for anything extra you have.
That is a lot of money to contribute but you are starting from zero and you both make a lot so I would challenge you two to contribute as much as you can.
In one place you say “does not match” and another “does not offer”. Those are different things. Which one applies? How much is in the HYSA? It must a huge amount if most of your salary is going into it and has been for years. Way above the FDIC limit. What plans does your spouse have/user currently?
Does your employer a 401(k) but just no match? You should still contribute. Max it out if you can.
>Would opening a tradtional IRA my only option currently?
A traditional IRA would be the way to go for now.
>Currently employer does not match 401K’s
Does that mean you have a 401k available? If so, you should be contributing to it to get the tax advantage now, even if there is no match.