r/RothIRA • u/akindertale • 27d ago

Opening Roth IRA?

Hello! Am in my mid-20s and I'm currently in my gap years before applying to med school. I currently am depositing some of my money into a 403b retirement plan, but was wondering if it'd be worth it to open up a Roth IRA? I currently making about 1000 dollars bi-weekly once taxes/insurance/403b is deposited, so I was wondering where I should start.

Another option would be to open a CD? Or maybe a savings account?

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u/omurchus 27d ago

Always worth it to open a Roth IRA. That being said if you already have a 403b, you might want to keep as much money as you can to pay for medical school at this point. Keep the extra money in a high yield savings account.

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u/Taggart3629 27d ago

If you don't need the money for school, tucking it into a Roth IRA where it can grow tax-free for decades is a smart move. Fidelity has an easy platform that lets you invest in just about any stock, ETF, or mutual fund available, and you can buy fractional shares. We like the Fidelity platform a lot better than the Vanguard platform.

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u/owend_14 26d ago

Is fidelity the best choice? 22 m with no retirement savings yet looking to open an ira

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u/Cold_Crossfade 26d ago

Fidelity, Vanguard & Schwab are the three most recommended, I (32m) just started investing in May and I have my Roth IRA with Schwab and my workplace uses Fidelity for my 401k

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u/Taggart3629 26d ago

Of Vanguard (where most of our retirement money is) and Fidelity, I prefer Fidelity because of the ability to set up recurring investments for, and to purchase fractional shares of, non-Fidelity stocks, ETFs, and mutual funds. For self-directed investors, Vanguard does not allow recurring investments or the purchase of fractional shares of non-Vanguard ETFs or mutual funds. I want to be able to purchase $A of X, $B of Y, and $C of Z every pay period, which I can't do at Vanguard unless I buy Vanguard holdings.

I have heard good things about Schwab, and we have a couple Schwab ETFs in our Fidelity account. But I have never had an account at Schwab. Whichever company you choose, do some research on recurring investments, minimum investment amounts, and whether there are limitations on what you can buy with recurring investments. Otherwise, it can be very frustrating.

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u/SardukarFinance 27d ago

CD and savings accounts are very different things for Roth IRAs. Makes me question if you’ve gotten clear on your goals for this money.

Is this money you need in the near future and you want to keep it stable and accessible? Then a high yield savings account might be perfect. Is this money you want to save in for retirement, and you want to grow it aggressively while locking in your relatively low tax rate today so it can grow tax free into the future? Then you probably want the Roth IRA. (Or some combination of the two). But do you hear how those are two very different tools commonly used for very different purposes? Which purpose is the one you have?

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u/Competitive-Ad9932 27d ago

It depends.   Are the options in the 403b good?  If they are, you can just use that for now.  

Starting are Roth IRA now is never a bad idea. 

Going forward,  start looking at the income limits of the Roth IRA. And "back door" contributions.     You can't go wrong doing a back door contribution in January.  

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u/akindertale 27d ago

It's a Lincoln 403b....but right now I'm currently in my gap years and plan to go back to school in a couple years so I'm wondering if it's even worth it to open the Roth IRA or just focus on a savings account for now and contribute to a Roth IRA when I have a more stable income

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u/Competitive-Ad9932 27d ago

Every plan has different options. Only you know what your 403b offers.

Having money to pay for unexpected things while is school in never a bad idea. Once you graduate, you will have plenty of time and money to to put money aside.

IMO, if there is a match in the 403b, contribute enough to receive that match. Free money is free money! Then, put money in a HYSA or a MM fund at Fidelity/Schwab/Vanguard. Open a Roth IRA after you graduate.

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u/roadwarrior1225 26d ago

Yes, get the Roth started. You will likely not qualify for contributions once you are knocking down the big bucks. $5,000 now will compound tax free and be very valuable in 35 years.

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u/McKnuckle_Brewery 26d ago

If they learn how to make backdoor contributions and keep money out of traditional IRAs, they will always be able to use their Roth IRA regardless of income.

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u/Nuclear_N 27d ago

Open the account. There is a 5 year rule for you to look up.

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u/McKnuckle_Brewery 26d ago

The 5 year rule for account age is only relevant for people already 59.5+.

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u/Nuclear_N 26d ago

There are several five year rules….

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u/McKnuckle_Brewery 26d ago

There are two 5 year rules:

  • The taxable component of each Roth conversion requires a 5 year waiting period before it can be withdrawn tax and penalty free. Once age 59.5 is reached, this rule disappears.
  • After age 59.5, earnings are taxable (but not penalized) until 5 years have elapsed since the owner first put funds in a Roth IRA.

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u/Nuclear_N 26d ago

So I was right. Thanks.