Hello! I need help weighing the pros and cons of opening a Roth IRA in my current financial situation.
I just turned 33 and make a little over $55k annually before taxes. Have a 401(k) I contribute 10% to monthly with a 4% company match and, most importantly, a fairly large inheritance that’s fully invested and currently worth about $582k.
Everyone I listen to encourages opening and maxing out a Roth IRA, but when I compare potential earnings using online investment growth calculators, it seems to me that, even with the tax perks of a Roth IRA, I would be better off contributing that yearly $6.5k to my current non-retirement investment account.
Here are my estimates:
Scenario 1:
I currently don’t have the income to contribute to both, so assuming I went ahead and maxed out my Roth and just let my non-retirement account grow on its own (assuming a 7% rate of return), it could look like this when I’m 65:
Non-retirement account: $5,078,030.97
Roth IRA: $826,636.16
Estimated total at 65: $5,904,667.13
Scenario 2:
Assuming I contributed the same amount to my non-retirement account (with starting balance of $582,659):
Estimated total at 65: $13,997,647.98
To me, the choice seems obvious, but I am very new to this and worry that I’m missing something. What else should I factor in to make my decision?
Thanks.
original posted by Cttn234 to r/personalfinance on Wed, 13 Mar 2024 15:56:20 GMT.