My IRA with VANGUARD

[astromeria]

Is "My IRA with Vanguard" the sequel to "My Dinner with Andre"?

 

[frujinator]

Confused

 

[astromeria]

See http://en.wikipedia.org/wiki/My_Dinner_With_Andre

 

[TromboneAl]

Fruj,

Here's why I mention converting some funds to a Roth.

When you put money in an IRA or SEPIRA, you deduct it from your income now, and pay taxes on it when you take it out.  The way you're going, you'll have lots of money when you take it out, and will be in a high tax bracket. I'm guessing that right now, you're not in such a high tax bracket.  So, although the IRA will compound tax free, you'll be paying a lot of tax on it later. If you take out a million bucks when you're 60, you'll pay taxes on it.

With a Roth, you don't deduct it now (that is, you pay tax on the money now), but you don't have to pay taxes on it when you take it out. If you take out a million bucks when you're 60, you won't pay a penny in taxes.

Other things being equal, and assuming you'll be in a higher tax bracket when you are 60+, it would be much smarter to have more of your money in a Roth IRA. Even if your tax bracket doesn't change, a Roth is usually better.  Google Roth Calculator for more on this.

Other factors may be important, but if you are in a super low tax bracket now, converting to Roth might make you much more money.

You can convert part or all of your SEP-IRA money to a Roth, and you'll pay taxes on it now.  But once in the Roth, it will just be like any other Roth money.

You've done the right thing by starting early, and you don't need to worry about the details.  However, if you want to get into investing as a hobby, details like this can improve your returns significantly.

 

[mickeyd]

Agree with Spanky.

Vanguard International Stock Index Fund is a fund of funds that has a mix of Euro, Pac, EM to the tune of 62%, 26.2% and 11.8%. There is only a 3% turnover rate and has an ER of .31%.

 

[Nords]

Other things being equal, and assuming you'll be in a higher tax bracket when you are 60+, it would be much smarter to have more of your money in a Roth IRA. 

Aye, there's the rub.

ER'ing in our 40s has put us in our lowest tax brackets ever, and we'll have incremental Roth conversions finished by the time we're in our 50s. I wouldn't necessarily race into a Roth conversion if I was still bringing in more than $15K/year earned income.

 

[frujinator]

I hear what you saying Trombone AL, But i have already maxed out my ROTH for 2005, and I will max it out every year as long as I continue investing!

Thanks for the advice!