Roth IRA

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I'm in my early 20s and making 60k a year with no expenses. I'm looking at a Roth IRA, how much should I put into it?

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$5500

After you contribute to your 401k up to the match.

$5500, if you can swing it.

jerosen said:   $5500

After you contribute to your 401k up to the match.

  You have until April 18, 2017 to make a 2016 contribution (as long as you had earned income in 2016).

With no expenses you should be maxing your ROTH, 401K and have some left over for post-tax investing.

fwuser12 said:   
jerosen said:   $5500

After you contribute to your 401k up to the match.

  You have until April 18, 2017 to make a 2016 contribution (as long as you had earned income in 2016).

  
Just to spell it out, $11,000, half designated for 2016 and half to 2017. At Vanguard, Schwab, or Fidelity. Invested in low-cost, diversified mutual funds or ETFs.

How does someone have zero expenses anyway?

jerosen said:   How does someone have zero expenses anyway?
  Mooching off parents for everything!

Quick question, Who keeps track of contributions verses gains on your Roth way down the road? If you change custodians you can't look at old statements and most people throw out tax records after 7 years. Does the IRS have a way to look up a running total of contributions even after 40+ years?

mastroadam said:   Quick question, Who keeps track of contributions verses gains on your Roth way down the road? If you change custodians you can't look at old statements and most people throw out tax records after 7 years. Does the IRS have a way to look up a running total of contributions even after 40+ years?
 

  
You keep track of them. The amounts do get reported to the IRS on Form 5498, so I would count on the IRS checking IRA distributions against contributions (prior to qualifying for tax-free withdrawals, that is), but I wouldn't count on the IRS making that information available to you if you needed it. I plan to keep copies of the relevant paperwork until I reach 60.

doveroftke said:   
mastroadam said:   Quick question, Who keeps track of contributions verses gains on your Roth way down the road? 
You keep track of them. The amounts do get reported to the IRS on Form 5498, so I would count on the IRS checking IRA distributions against contributions (prior to qualifying for tax-free withdrawals, that is), but I wouldn't count on the IRS making that information available to you if you needed it. I plan to keep copies of the relevant paperwork until I reach 60.

  The down side is that you have to keep the records yourself for Roth contributions, unlike traditional contributions where you have to keep track of basis on Form 8606.  The bright side is that it's very rare for your Roth basis to matter - you won't be taxed on it as long as the politicians keep their word, so it doesn't matter like for nondeductible traditional contributions where your tax on your eventual retirement distributions depend having kept records.  The case I think of where your Roth basis matters is if you lose a ton and now your Roth is below its contribution basis.  In that case, if you cash out all your Roth accounts and close them, you can take a 2% misc tax deduction for the amount of your loss (ie whatever basis was less however much came out when you liquidated them).  Personally I'd try hard not to invest in a way that would blow up like that, but some people invariably do (and probably don't keep good Roth records either).   

xerty said:   
doveroftke said:   
mastroadam said:   Quick question, Who keeps track of contributions verses gains on your Roth way down the road? 
You keep track of them. The amounts do get reported to the IRS on Form 5498, so I would count on the IRS checking IRA distributions against contributions (prior to qualifying for tax-free withdrawals, that is), but I wouldn't count on the IRS making that information available to you if you needed it. I plan to keep copies of the relevant paperwork until I reach 60.

  The down side is that you have to keep the records yourself for Roth contributions, unlike traditional contributions where you have to keep track of basis on Form 8606.  The bright side is that it's very rare for your Roth basis to matter - you won't be taxed on it as long as the politicians keep their word, so it doesn't matter like for nondeductible traditional contributions where your tax on your eventual retirement distributions depend having kept records.  The case I think of where your Roth basis matters is if you lose a ton and now your Roth is below its contribution basis.  In that case, if you cash out all your Roth accounts and close them, you can take a 2% misc tax deduction for the amount of your loss (ie whatever basis was less however much came out when you liquidated them).  Personally I'd try hard not to invest in a way that would blow up like that, but some people invariably do (and probably don't keep good Roth records either).   

  You need to keep track of your Roth contributions in case you need to withdraw funds before the Roth is qualified (oldest Roth opened 5 yrs+ and age 59.5).   If withdrawn early you have to compare against
contribution and conversion basis to prove that the withdrawal is not taxable.

jerosen said:   How does someone have zero expenses anyway?
  Suspended animation. Saw it once on a movie with Sigourney Weaver.

Logan71 said:   
jerosen said:   How does someone have zero expenses anyway?
  Suspended animation. Saw it once on a movie with Sigourney Weaver.

  They mostly come out at night...  Mostly.



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