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Investing outside of 401k for the first time
Old 11-08-2018, 08:57 PM   #1
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Investing outside of 401k for the first time

So I am just starting my research, but thought I would ask here too, and see what has worked for people, or what plans they have put into place.

Currently, I am 49 and my DW is 44. We both have our retirement accounts through work (401k) with pretax and Roth options. I want to open a Roth account outside of work for the following reasons.... first of all I am maxing out my current limit in my 401k (but I turn 50 in 2019 so it goes up). Second of all, when I leave work and retire, I will want to move my money into personal accounts and not leave them in my work 401k. My understanding is that I will need to have a Roth account open for 6 years before I can withdraw funds from it, even if it is transferred from my Roth 401k which will have been open for a long time.

My questions are...
- Should I open a Roth IRA for myself, and one for my wife, or should I open a joint account
- My wife is 5 years younger than me and wont be able to withdraw from her account until 59.5, she will likely be retired before that.
- Can I get a Roth IRA started with any brokerage?
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Old 11-08-2018, 09:11 PM   #2
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IRA accounts cannot be created and titled for more than one living person, so you and your spouse will need separate accounts. Roth IRA is an account type available at virtually all brokerages.
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Old 11-09-2018, 05:27 AM   #3
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If you are retired I believe that you can withdraw from a 401K at 55.
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Old 11-09-2018, 05:41 AM   #4
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If you are retired I believe that you can withdraw from a 401K at 55.
You have to turn 55 (or older) in the year that you leave the employer. So in other words you can't leave employ at 54 then go back to that employer / 401k and get penalty free withdrawals.
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Old 11-09-2018, 06:16 AM   #5
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Start a taxable account too so you can access funds for any reason without the encumbrances of sheltered accounts. Put tax efficient investments, low/no cost index funds, muni’s and money markets in the account.
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Old 11-09-2018, 12:44 PM   #6
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You can take the principal from a ROTH IRA at any time, with no penalty or tax, as it's already been taxed.

IRA = Individual Retirment Account. No joint owners.
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Old 11-09-2018, 02:31 PM   #7
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My questions are...
- Should I open a Roth IRA for myself, and one for my wife, or should I open a joint account - One for you and one for her
- My wife is 5 years younger than me and wont be able to withdraw from her account until 59.5, she will likely be retired before that.
- Can I get a Roth IRA started with any brokerage? - Yes, we use Etrade, Vanguard and Fidelity. All have the types of accounts you would need.
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Old 11-09-2018, 02:50 PM   #8
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Great that both you and your wife are funding 401K's. Continue to feed them up to the point that your employers quit matching you. Then switch over to self funded Roth IRA's separate from the 401K's.

Don't worry about when you retire, as companies always require retirees and terminated employee 401K's to be rolled over to Rollover IRA's separate from their accounts. You will then have the ability to use the very best funds at whatever investment company you wish to use. And my best suggestion is to save as much as humanly possible--until it hurts.

Roth IRA's are separate from spouses. It's nice that your wife will retire early, however I hope you will be able to keep health insurance through her employer until she retires. That is a seriously big expense for Early Retirees--until Medicare kicks in at 65 years. Healthcare expenses often makes spouses stay in the workplace longer than they intend to--depending on the costs.
You probably need to have substantial savings in tax paid accounts since your wife will be 5 years later than you getting into her retirement accounts.
And you need to pick one of the big low cost investment companies like Fidelity, Schwab or others that have a supermarket approach to investing. There's nothing like diversification to minimize risks.
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Old 11-09-2018, 03:33 PM   #9
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Only the holding period of your Roth IRAs is relevant once you rollover your 401k Roth. The holding period of the 401k Roth does not come with it when it is rolled over into a Roth IRA.

You can open Roth IRAs for each you and your spouse to get the Roth holding period timeclocks started. The clock starts at the beginning of the tax year that you first invest funds into a Roth IRA. So if you put money in a Roth IRA yet this year, the clock will start as of 1/1/2018. If you wait until 2019, then the clock will start as of 1/1/2019.

Any brokerage should be able to accommodate you.
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Old 11-12-2018, 10:23 AM   #10
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Thank you all! Great information.

Wonder what I was thinking... joint IRA's. I know better than that....

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Old 11-12-2018, 12:50 PM   #11
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Originally Posted by COcheesehead View Post
Start a taxable account too so you can access funds for any reason without the encumbrances of sheltered accounts. Put tax efficient investments, low/no cost index funds, muniís and money markets in the account.
+1

We have most of our equities in a taxable account. For us, LTCG are more tax efficient than RMDs plus there are no restrictions on its use and we can put it into a trust.
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Old 11-14-2018, 12:45 AM   #12
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+1



We have most of our equities in a taxable account. For us, LTCG are more tax efficient than RMDs plus there are no restrictions on its use and we can put it into a trust.


Another vote for starting a taxable portfolio if you donít already have one. Gives you tax diversification and more flexibility.
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