Retirement planning starting in 2026 - need advice

[mrfeh]

I'm currently single at the moment, also with zero debt.
Regarding Fidelity and Schwab, there is a Fidelity near my residence. Should I go there to open the IRA? As opposed to online? I just don't want to make any errors, while also getting some advise would help (though I am not sure at what cost.) I have to wait until mid January when that cd matures in order for me to start allocating my funds. Until then, I'll look to also read up on these suggestions as well.

I'm going to be very frank...don't take this as criticism.

It's clear you have no knowledge regarding investing. That's fine, but the first thing to do is educate yourself on the basics.

You've asked a somewhat specific question, and are getting fairly specific answers, but you need to understand the big picture before you do anything.

There is no rush. Start reading and learning.

I would start here: https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[joesxm3]

I agree that the first order of business should be learning about the basics of investing.

However, no reason not to open a taxable brokerage and IRA account at Fidelity. If your income is low enough to qualify for ROTH IRA do that.

If you want to go slowly, you can just leave your contributions in the core money market fund for each account. But make sure they set you up with a core MM paying 3.5% or so and not a bank sweep paying zilch.

The stock market is at a high and sooner or later it will go down. The theory is to buy a broad index fund and just sit through the ups and downs. If you think you might freak out if the market drops 20%, then go slowly. Leaving your money in the core account is basically a tax deferred version of the bank.

Taking a few months to learn is not wasting a lot of time and you do have until April to contribute for 2025.

 

[gecko10x]

I don't think it's been said yet, but if you want to be able to contribute to an IRA for 2025, I believe it needs to be opened in 2025 even if you don't plan to contribute until April 2026. So I would open the account now, before the end of the year.
Apologies, I thought for sure this was correct. IDK where I got that from or what I was confusing it with.

 

[mrfeh]

I agree that the first order of business should be learning about the basics of investing.

However, no reason not to open a taxable brokerage and IRA account at Fidelity. If your income is low enough to qualify for ROTH IRA do that.

If you want to go slowly, you can just leave your contributions in the core money market fund for each account. But make sure they set you up with a core MM paying 3.5% or so and not a bank sweep paying zilch.

The stock market is at a high and sooner or later it will go down. The theory is to buy a broad index fund and just sit through the ups and downs. If you think you might freak out if the market drops 20%, then go slowly. Leaving your money in the core account is basically a tax deferred version of the bank.

Taking a few months to learn is not wasting a lot of time and you do have until April to contribute for 2025.

The OP has until 4/15 (or whatever tax day is this year) for 2025 contributions.

No need to do anything near term.

 

[mrfeh]

I don't think it's been said yet, but if you want to be able to contribute to an IRA for 2025, I believe it needs to be opened in 2025 even if you don't plan to contribute until April 2026. So I would open the account now, before the end of the year.

The AI summary for my web search says this is incorrect.

But, I'm not familiar with the letter of the law.

 

[YellowSubmarine]

I'm in my 40s and just starting to plan a retirement fund. I'm a manager in our family business.
The only investing I have been doing thus far is the safe CD investing.
I was talking to my accountant and he told me the following,
Because I do not have a retirement plan at work, he suggests to open up a “traditional IRA” and deposit $7,000 for 2025 tax year. He goes on to say I have up to April 15, 2026 to deposit this amount for 2025. Going forward, I should actually put the $7k in this account every year since it will offset your tax liabilities.

Regarding the rest of the funds, he would also recommend I put away another $7,000 in a ROTH IRA (there is no tax benefit now but you will have a benefit when you draw the funds on retirement.)

I hate to admit how clueless I am, but I am starting this year to learn more and act accordingly. I see that my bank has an IRA account, 3 months for 3.68% with APY 3.75%
Here's my question:

I'm planning to open it through my bank at that 3.68% rate in January. How does this work? Is it like a cd? Does it continue to renew? I know it's only a yearly deposit of $7,000 is this case, and I believe $8,000 after 50.

Can someone please advise? I'm also planning to enter the stock market too, but I'll leave that inquiry on another post.

I agree with others, do a brokerage IRAs vs Bank. When I had my business, we always maxed out IRAs and HSA. Also note the IRA limits per tax year.:

No, you cannot contribute $7,000 to a traditional IRA and another $7,000 to a Roth IRA in the same tax year. The annual contribution limit is a combined total across all of your traditional and Roth IRA accounts.
For 2024 and 2025, the total maximum contribution is $7,000 if you are under age 50, and $8,000 if you are age 50 or older.

Key Rules for IRA Contributions

• Combined Limit: The total amount you contribute annually across all your IRAs (traditional and Roth) cannot exceed the IRS limit. For example, if you contribute $3,000 to a traditional IRA, you can only contribute a maximum of $4,000 to a Roth IRA (assuming you are under 50).
• Earned Income Requirement: You must have taxable compensation (earned income) at least equal to your total contribution amount for the year.
• Roth IRA Income Limits: While anyone with earned income can contribute to a traditional IRA (though the deduction may be limited by income), there are modified adjusted gross income (MAGI) limits that determine how much you can contribute directly to a Roth IRA. If your income is too high, you may not be eligible to make a direct Roth contribution at all.
• Penalties: Contributing more than the allowable limit can result in a 6% excise tax (penalty) on the excess contributions for each year they remain in the account.

Options for Your Contributions

• You can split your total allowed contribution between a traditional and Roth IRA in any proportion you choose, as long as the total remains within the annual limit.
• If you are a high-income earner and not eligible for direct Roth IRA contributions, a "backdoor Roth IRA" strategy might be available. This involves making a nondeductible contribution to a traditional IRA and then converting it to a Roth IRA. This strategy has specific tax reporting requirements (using IRS Form 8606) and it's best to consult a tax professional if you pursue this.

 

[junkanoo]

I don't think it's been said yet, but if you want to be able to contribute to an IRA for 2025, I believe it needs to be opened in 2025 even if you don't plan to contribute until April 2026. So I would open the account now, before the end of the year.

It's not been said because it's not true. You can open a new account in 2026 with a zero balance and fund it by Tax Day in 2026 for 2025.

That said, there is absolutely no harm in creating an account now and funding it toward tax day.

 

[Jerry1]

There is no rush. Start reading and learning.

I agree that the first order of business should be learning about the basics of investing.

However, no reason not to open a taxable brokerage and IRA account at Fidelity. If your income is low enough to qualify for ROTH IRA do that.

I would go to the Fidelity near you and open up the IRA. I would fund it per instructions from your accountant. What I would not do is listen to Fidelity about investing. Just put the money in a money market and then, as instructed above, start reading and asking questions. You can invest it in something else once you've become more comfortable with your options. Again, I can't stress enough. Don't sign up for anything where Fidelity wants any type of management fee for helping you invest. Even if you choose to have Fidelity manage your money, which most here will say you shouldn't, you still want to know more about investing than you do now. Just get started - get the account open and start learning.

 

[GreekGeek1222]

I agree that the first order of business should be learning about the basics of investing.

However, no reason not to open a taxable brokerage and IRA account at Fidelity. If your income is low enough to qualify for ROTH IRA do that.

If you want to go slowly, you can just leave your contributions in the core money market fund for each account. But make sure they set you up with a core MM paying 3.5% or so and not a bank sweep paying zilch.

The stock market is at a high and sooner or later it will go down. The theory is to buy a broad index fund and just sit through the ups and downs. If you think you might freak out if the market drops 20%, then go slowly. Leaving your money in the core account is basically a tax deferred version of the bank.

Taking a few months to learn is not wasting a lot of time and you do have until April to contribute for 2025.

Remind me again, what is the difference between a core MM paying 3.5% as opposed to a CD of 3,6, or 8 months at the same 3.5%, for example? Is it that you can continually add to a MM?

 

[Al18]

A MM account is similar to a savings account at a bank. You can deposit or withdraw at any time. Transfers between your bank and MM account complete in 24-48 hours. Also, MM are not guaranteed by the FDIC. In reality, I think the last time a MM fund was close to going broke was during the 2008 financial crisis - and the government stepped in to prevent the failure.

 

[Surewhitey]

Don't forget to consider the income limit for deduction of a TIRA...

 

[Original Wally]

Welcome! LOTS of great info here. The most important thing is to START.

 

[SnowballCamper]

Here is my recommended order for a reading assignment ;-)

1. An easy read that emphasizes the most important things: https://www.etf.com/docs/IfYouCan.pdf (Don't fret that he's writing to a 25 year old, the same ideas apply whenever you start)
2. A repeat of #1 with links to more information https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit
3. For short articles on specific topics Investopedia.com is a good resource.
4. When you are ready to get in the weeds on a particular topic this online reading room covers a lot, and includes the original academic references. Reading Room

 

[joesxm3]

Remind me again, what is the difference between a core MM paying 3.5% as opposed to a CD of 3,6, or 8 months at the same 3.5%, for example? Is it that you can continually add to a MM?

The MM is not FDIC insured, but relatively safe. The rate on the MM is not guaranteed like a CD, it fluctuates. You can add or subtract anytime.

Each Fidelity account has a core position where loose cash ends up by default (dividends, new deposits, proceeds from equity sale etc.) Most seem to offer a choice of a Fidelity MM fund or a setup where they they sweep to a FDIC bank and back every night. But that pays low bank rates.

You can also hold one or more MM funds, CD's (from bank but bought through Fidelity) or Treasury bills or bonds in your account outside the core holding.

 

[Koolau]

Welcome to the Forum.

Have you figured your expenses in Retirement? That will help you decide how to invest.

Do you already have an emergency fund? Probably more important than you initial investments.

Try out the SEARCH function here. You can find the answers to a number questions there.

Maybe start out reading the FAQ in the Forum.

Early Retirement FAQs

Links and FAQs to discussions covering the most common topics for early retirement and financial independence.

www.early-retirement.org

 

[VanWinkle]

I'm in my 40s and just starting to plan a retirement fund. I'm a manager in our family business.
The only investing I have been doing thus far is the safe CD investing.
I was talking to my accountant and he told me the following,
Because I do not have a retirement plan at work, he suggests to open up a “traditional IRA” and deposit $7,000 for 2025 tax year. He goes on to say I have up to April 15, 2026 to deposit this amount for 2025. Going forward, I should actually put the $7k in this account every year since it will offset your tax liabilities.

Regarding the rest of the funds, he would also recommend I put away another $7,000 in a ROTH IRA (there is no tax benefit now but you will have a benefit when you draw the funds on retirement.)

I hate to admit how clueless I am, but I am starting this year to learn more and act accordingly. I see that my bank has an IRA account, 3 months for 3.68% with APY 3.75%
Here's my question:

I'm planning to open it through my bank at that 3.68% rate in January. How does this work? Is it like a cd? Does it continue to renew? I know it's only a yearly deposit of $7,000 is this case, and I believe $8,000 after 50.

Can someone please advise? I'm also planning to enter the stock market too, but I'll leave that inquiry on another post.

Automate whatever you decide, increase the rate every year, and invest in a balanced fund that is low cost and allocation appropriate. Don't look for 20 years and you may find retirement is partially funded by the results.

 

[nwsteve]

If you visit the Fidelity office, suggest you also inquire about setting up a self directed 401k for your company.
Then you can use company money to match your contribution--there are limitations but you can put a sizeable chunk out of reach of Uncle Sam and really kick building a sizeable 401k balance with company match funds. You set the match rate for what your company can afford. It worked well for us as DW and I were only employees. If you do have employees your company will also have to provide the same match so size of your company does impact

 

[TheWizard]

If you visit the Fidelity office, suggest you also inquire about setting up a self directed 401k for your company.
Then you can use company money to match your contribution--there are limitations but you can put a sizeable chunk out of reach of Uncle Sam and really kick building a sizeable 401k balance with company match funds. You set the match rate for what your company can afford. It worked well for us as DW and I were only employees. If you do have employees your company will also have to provide the same match so size of your company does impact

This seems like a bit of an advanced topic for this OP.
I could be wrong of course...

 

[Koolau]

This seems like a bit of an advanced topic for this OP.
I could be wrong of course...

IDK but I was actually thinking along the same lines of a self-directed 401(k). Running a business gives you some opportunities that might just make all the hard w*rk worthwhile - especially in managing taxes.

I'd look into it. DW set up a matching IRA plan for her empl*yees. She took full advantage of it while most of her empl*yees did not. You can't out guess 'em. Heh, heh, since I was a part time empl*yee, I took full advantage and it really helped jump-start our retirement.

 

[TheWizard]

IDK but I was actually thinking along the same lines of a self-directed 401(k). Running a business gives you some opportunities that might just make all the hard w*rk worthwhile - especially in managing taxes.

I'd look into it. DW set up a matching IRA plan for her empl*yees. She took full advantage of it while most of her empl*yees did not. You can't out guess 'em. Heh, heh, since I was a part time empl*yee, I took full advantage and it really helped jump-start our retirement.

I totally agree, but it's not clear that the OP.is quite up to speed on some of the things we're talking about...

 

[Jerry1]

I totally agree, but it's not clear that the OP.is quite up to speed on some of the things we're talking about...

That’s why he should be talking to his accountant. Hopefully this is a CPA type accountant and not a bookkeeper. If his accountant hasn’t already brought up these things, it might be time to get a different accountant. At the very least, he should be clear with his accountant that he want to explore all available options around tax reduction retirement saving.

 

[GreekGeek1222]

So, I've been doing my reading and I would like to ask the following, in order to fully understand the basics:

As mentioned, my accountant told me to open up a “traditional IRA” and deposit $7,000 for 2025 tax year. He goes on to say I have up to April 15, 2026 to deposit this amount for 2025. Going forward, I should actually put the $7k in this account every year since it will offset your tax liabilities. Then he would also recommend I put away another $7,000 in a ROTH IRA (there is no tax benefit now but you will have a benefit when you draw the funds on retirement he says.)

For clearer understanding, can you reply as followed (by numbered questions

1. Is it $7,000 for under 50 or $7,500? I've read $7,500
2. Am I doing traditional IRA and ROTH IRA at the same time each year? Are these 2 different accounts?
3. Meaning, should I factor to put away a total of $14,000/$15,000 yearly? Because I have read you can only put away a total of $7,000/(or if it's $7,500) a year? Even though you can have as many IRA accounts you want. (which doesn't make sense to me why you would have multiple IRAs if the maximum amount of money cannot be exceeded.)
4. I plan to go with Fidelity. Does anyone worry about Fidelity being taken over, shut down, going out of business etc. What happens then?

Thanks again.

 

[imjustawarrior]

Your accountant is wrong. Read the IRS info for yourself. Google helps.

Fidelity is great. No worries for me.

 

[joesxm3]

1. Grok says $7000 for 2025 and $7500 for 2026. Over 50 add an extra $1000.

2. Traditional IRA and ROTH are two separate accounts at Fidelity.

3. Grok says you can split between IRA and ROTH in a given year but your total is subject to the $7000/$7500 annual limit.

4. Fidelity is very stable. There is a sort of insurance against broker fraud called SIPC. If they shut down (very unlikely) you would be given option to move to a different company.

IRA lets you deduct from your current taxes but you have to pay tax when you take it out. With ROTH you do not get a deduction now, but you do not pay taxes when you take it out.

So, basically, ROTH is better the more time you have before taking out or if you expect the investment in the ROTH to grow massively. There is an income limit of $150,000 (single filer 2025). Over that you can't directly deposit into ROTH.

You should ask Fidelity to open three accounts:

Normal taxable brokerage account linked to your checking account. Used to move money in and out of Fidelity and to hold additional savings beyond the IRA.

Traditional IRA. Gives you a choice of which to fund in a given year or if income too high for ROTH.

ROTH. Gives you the choice.

Fidelity lets you have as many accounts as you want. Some use multiple accounts to have savings buckets, long term, emergency fund, vacation plan etc.

Bottom line.

Probably open all three accounts. They can be empty at first.

Have your Fidelity representative explain them to you and show you how to access your accounts online.

Deposit $7000 for 2025 and $7500 for 2026. Decide if IRA or ROTH. If eligible for ROTH you might want to do some of each, up to the $7000/$7500 limit.

 

[Steelpony]

I'm in my 40s and just starting to plan a retirement fund. I'm a manager in our family business.
The only investing I have been doing thus far is the safe CD investing.
I was talking to my accountant and he told me the following,
Because I do not have a retirement plan at work, he suggests to open up a “traditional IRA” and deposit $7,000 for 2025 tax year. He goes on to say I have up to April 15, 2026 to deposit this amount for 2025. Going forward, I should actually put the $7k in this account every year since it will offset your tax liabilities.

Regarding the rest of the funds, he would also recommend I put away another $7,000 in a ROTH IRA (there is no tax benefit now but you will have a benefit when you draw the funds on retirement.)

I hate to admit how clueless I am, but I am starting this year to learn more and act accordingly. I see that my bank has an IRA account, 3 months for 3.68% with APY 3.75%
Here's my question:

I'm planning to open it through my bank at that 3.68% rate in January. How does this work? Is it like a cd? Does it continue to renew? I know it's only a yearly deposit of $7,000 is this case, and I believe $8,000 after 50.

Can someone please advise? I'm also planning to enter the stock market too, but I'll leave that inquiry on another post.

If I was your age I’d start a Roth IRA first and fund it as much as you can each year. Don’t let taxes guide your choice now. I’d invest it in either low cost VTI a whole American stock market index fund or VOO a big part of VTI. Make sure it’s on reinvestment. Results will be similar over time so don’t freeze up making a choice. Time in the market and compounding are your greatest wealth makers not your future perceived brilliance.

As you learn you can explore other areas and invest later on in a tax delayed account like a Traditional IRA each year after a Roth is fully funded if you wish.

Investing can be a full time job, a hobby or become a gambling obsession. I started at DOW 750 and look where that index is now? Don’t overthink it, it’s not that hard to achieve a degree of financial security.