Self-Funding Your Retirement with a Roth IRA – 2 Minute Q&A Tuesday

by Sahirenys Pierce

In this 2 Minute Q&A Tuesday, we’re going to clarify a few of the important topics about self-funding your retirement. We’re seeing more companies than ever who aren’t able to offer 401(k) accounts nor their contribution matches. This is causing a shift in opinions about how we thought about retirement and company involvement. Leaving many Americans completely in the cold with no company-sponsored retirement plan and no clue in what to invest in. Leading us to question how on earth are we supposed to retire? Which individual retirement account do I pick, Roth IRA, or a Traditional IRA? To help you navigate these difficult questions, let’s break down how to self-fund your retirement with poise.

What should I do if my company doesn’t offer a 401(k) retirement option?

A lot of millennials are now questioning how to save and invest for retirement. Especially, if their company doesn’t offer retirement options or a contribution match. The bitter truth is that a lot of companies can’t afford to offer retirement accounts. We have to start building a more realistic relationship between employment and retirement. The traditional idea of getting a good job and all of your benefits will be taken care of is a dying pipe dream.

We’re seeing the 401(k) match slowly disappearing, the same way we heard about pensions disappearing. This puts a light on the bad advice of just switching to a company that offers retirement matches. This is not a realistic approach for most who need a job and if companies continue to remove these benefits. The best option we have is to get comfortable self-funding our own retirement without expecting our companies to do so.

The two options you have to self-fund your own retirement is a Traditional IRA or a Roth IRA. These accounts both have a contribution limit of $6,000 as of 2020 and can be opened at most financial service companies. Here are a few of the top institutions to checkout if you want to open a Traditional IRA or a Roth IRA:

Why do you like investing in a Roth IRA vs a Traditional IRA?

The Roth IRA is the modern facelift to the traditional individual retirement account. I personally see a lot of benefits of investing my regular money and cashing out my investment growth tax-free at retirement. With Roth IRAs, all of your contributions to this retirement account won’t give you a tax benefit now like Traditional IRA’s. But, they will give you tax-free growth and more flexibility of how you can use your retirement funds.

This is something that has caught the attention of even big-time financial gurus like Suzan Orman, who are now recommending Roth IRAs and Roth 401(k). Now that they’re at the age of retirement, they’re seeing a drastic decrease in their retirement accounts due to taxes. Every time they pull any investment earnings from their portfolio they have to pay income taxes. This is something that could have been avoided if invested in a Roth IRA vs a Traditional IRA.

Closing Thoughts

To close this 2 Minute Q&A Tuesday, I want to remind you to invest the money in your retirement account. You have two options, either automate your investments or set a date to invest the money in your account. It isn’t automatically invested and you have to pick the investments yourself. A good baseline of investments will be low fee index funds, ETFs, and Target-Date funds. These are all solid investments to build a foundation for your retirement goals. I hope this information is valuable and helps you self-fund your retirement with poise.

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