Today I opened a Roth IRA account at Vanguard for the hubby and fully funded it for 2007. Why so late you ask? Well, the hubby never ever had a Roth IRA account and since we got married last year I wasn’t sure if we were low income enough to contribute to a Roth IRA. The Roth IRA is one area where you can clearly see the marriage penalty. A single filer can contribute the full amount to a Roth IRA when he or she makes less than $99,000, but a married couple can only contribute the full amount if they make less than $156,000. I am not quite sure why it is structured this way because it seems to be saying that married people should get less tax advantaged accounts?
Basically I was afraid that we weren’t eligible to contribute any longer. However, after tallying up our income and donations our adjusted gross income was just a bit under the limit and I signed the hubby up and funded the account from our joint account. Right now I just parked his money in Vanguard Target Retirement 2045, but that could be changed in the future.
Looking back, I guess it is good that I had to wait a bit to open and fund this account because the market went down quite a bit. If we had opened the account back in the end of August when we got married then the money would have diminished quite a bit. Then again, it doesn’t matter that much because we plan to hold the funds for 34 to 35 years.
I really like Roth IRAs because they give us the option of taking out our contributions, and there are no taxes on the earnings in the future. I have had one since college and funded it faithfully every single year. The hubby just turned 25 recently so he can start withdrawing the money in 34.5 years, and I am sure these years will pass faster than we think.
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7 comments ↓
good, we may consider to setting up one too if we do some plannings
I’ve been looking at opening a Roth IRA too. Why did you choose Vanguard? They’re one of the ones I was looking at.
Yes, you definitely see the marriage penalty there. I’m not sure why they even have income limits at all for a Roth. It’s not like a super-rich person could use it to slash their tax bill, because they’d have the same contribution limits as anyone else.
I also like the idea of being able to take out deposits, just in case. I don’t want to take anything out, but it’s nice to have limited access. Micah doesn’t have one yet, but he’s the beneficiary on mine, so in case something happens to me he’s covered.
We’re going to try to start funding one for him later this year as things settle down.
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Kudos to you! I wish I had been as money savvy during my college years as you are.
Way back in the day a professor told me about IRA’s. Two thousand a year was the limit back then (around 1985). Great idea I thought. I left the class, went out with a buddy, drank beer, forgot about the Roth. Twenty three years later I wish I headed to a broker rather than my friends house.
Don’t get me wrong, my wife and I are on our way to a comfortable retirement…but boy-oh-boy if I had heeded my professors advise, I would be retiring in 8 years at the ripe old age of 50 instead of at 60.
Kids, DON’T DO WHAT I DID! Take it from an old man at the ripe of age of 42 . Save for retirement as soon as you leave college!
Sure, you have the whole world ahead of you. Time is your friend in all things financial. But don’t procrastinate. Time is not your friend when it comes to retirement. It’ll be here before you know it.
Did you look at anywhere other than Vanguard? I am looking to do the same exact thing for my wife and have been looking at Vanguard (where my 401K is) and Charles Schwab.
Since I have a traditional 401K and a rollover IRA, I think a Roth might be a good hedge against taxes later.
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