tornadored

Hello everyone,

I recently graduated from college in May, and am now pursuing my MBA. I worked throughout college and have no debt and was hired for an excellent government job half way through my senior year of undergrad. Since I worked full time throughout college I have accumulated to date about $30,000 in an investment account and kept about $10,000 in cash in CDs, money market accounts, and savings accounts.

I approached my investment representative about opening an IRA and he recommended against it. I have a 457 plan through my employer (similar to 401k) which I put 10% of my gross pay into at this time. He felt that it was not feasible at this time to open an IRA because of my 457. However, I feel otherwise and am considering opening an E-Trade account.

Now, my question is, what IRA (Traditional or Roth) would be most suitable for someone in my situation? Since I am young (23) and have little debt with the exception of my MBA tuition (which is partially paid for by my employer), I would like to kick start my retirement planning early.

Thanks for your help!

lpj8

I am by no means an expert on this topic, but based upon what I have read, and the people I have spoke with, go for a Roth IRA if you qualify for it. I found some of the information on Fool.com to be helpful:
http://www.fool.com/ira/ira.htm

I am also fresh out of grad school, and will be opening an IRA in the near future.

NoSoup

Providing you can qualify for it, I would absolutely recommend a Roth IRA.

Money that has compouned for a lifetime without paying any taxes or capital gains (with, of course, the execption of the initial amount you put in)?

Sounds good to me

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Just in case you were wondering...

tornadored

That is my concern, I feel that by putting so much into my 457 may make me end up paying taxes on my Roth contributions.

Thanks!

Jimellow

You wil pay taxes on your Roth contributions initially, regardless.

The current max deposit per year is $4000, and I think that may be increased further in a few years.

You don't necessarily need a IRA if you invest a lot on your own, and have the self control to not spend it all before retirement. IRAs are nice because the money is locked up and you simply can't withdraw it early, except for a few exceptions as a result of life occurences.

Regarding regular or Roth, I think Roth IRA is ideal. There are circumstances that make a regular IRA ideal over a Roth, but I don't remember the details. Perhaps if you are already in a high income bracket when you start the IRA, a regular IRA is ideal. When you invest in a Roth, you are taxed based on your current income level, and thus will pay less taxes than when you would regularly cash out $1 million in a regular IRA. In the Roth, the taxes are paid up front and you can generally withdraw the money tax free when you retire. In a regular IRA, you are taxed on the withdrawn money, and that generally results in a much higher tax payment, as a result of you being in a higher income bracket as a result of the large sum withdrawn.

In my situation, I Roth IRA is ideal. I am a bit shady on the situations in which a regular IRA is ideal, and the paragraph above may not be entirely correct, but the general idea is.

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