Funds that can be used as quasi-savings accounts / beat inflation with low risk to principle

[Truefan31]

Roth IRA is not guaranteed earnings. It can go up or down.

breh that goes for any investment. The smart thing is to have it in funds that track the market like the S&P. On average you get around 7-12% annually, beating inflation by a significant margin. As long as you keep contributing and keep expense ratios low, you will earn money.

And w/a Roth IRA again it's like a super savings account. You have access to your contributions at any time without penalty, while the earnings grow tax free. Best case scenario is to not touch the Roth IRA at all, but if you must, it's a super savings account that earns money tax free.

 

[Astroslik]

breh that goes for any investment. The smart thing is to have it in funds that track the market like the S&P.

I’m new to Roth IRA, what do you mean by this? And does it matter where I open up my Roth?

 

[Truefan31]

I’m new to Roth IRA, what do you mean by this? And does it matter where I open up my Roth?

funds that track the market, basically they mimic the performance of the stock market. ETFs, index funds, etc, there's plenty that do this. It's important to look at the expense ratios of funds, staying low so that more of your money is working for you.

The market historically averages around 7-12% annually, and honestly most ''financial experts'' cannot beat it on their own in the long run. So it's smart to put the money in good funds, and let the compounding interest do its thing.

It doesn't matter where you do a Roth IRA, but it's suggested to use good companies with a long track record. Vanguard/Fidelity etc are examples of firms that both offer cheap options yet a wide range of options.

A Roth IRA is imo a no brainer instrument to do. It's literally a super savings account. You put after tax dollars in, it grows tax free, the earnings are tax free. Hopefully you won't, but if you ever need money for an emergency, you can tap into your Roth CONTRIBUTIONS with no penalties/taxes etc. Just don't touch the earnings.

 

[BushidoBrown]

Crypto is the answer for every thread in this sub

relax

 

[sayyestothis]

A lot of dangerous info in here.

 

[PikaDaDon]

A lot of dangerous info in here.

like? I don't see anything wrong with what @Truefan31 posted

 

[Truefan31]

like? I don't see anything wrong with what @Truefan31 posted

There isn’t, in my opinion.

 

[O.iatlhawksfan]

Don't they have T-Bills that adjust to the rate of inflation

 

[Truefan31]

Don't they have T-Bills that adjust to the rate of inflation

Typically T-Bills are super conservative, and short term. Basically just holding face value when maturity occurs. I really don't like them honestly, especially for younger investors looking for consistent gains. Some can use them to balance out riskier investments, but I just mainly use ETFs and funds that at least track the S&P500.

T-Bills can be somewhat lucrative, like say getting a 3% discount on a face value note (so like $97 for a $100 when it matures). But I'm not really a fan of the auction style bidding, and you'll pretty much never get the 8-12% on average the market gives you.

 

[Perfectson]

I think there's some confusion here. A Roth IRA is already taxed contributions, and the earnings are also tax free. As long as you only need the CONTRIBUTIONS, there's no penalty or tax. You only pay tax on qualified earnings if you take out the Roth earnings before the age of 59 1/2.

The Roth IRA is like a super savings account that's also a retirement account. Keep putting 5500 a year in, let it grow and earn, and try not to touch it. But in severe emergencies if you need it, you have access to the CONTRIBUTIONS at any time no penalty.

A bit late, you're right but that's exactly what I said, you're still taxed on qualified earnings - so again if you want liquidity why put it in a Roth IRA, that's not what it is there for. YOu pay additional taxes/penaltties for touching any qualified earnings.

You put 10,000 in a Roth IRA for liquidity purposes, you make 10% in a year so you have 11,000. YOu put your money out to purchase a car, you get hit with taxes on the 1,000 plus a penality (which i think is still 10% or something).

 

[Truefan31]

A bit late, you're right but that's exactly what I said, you're still taxed on qualified earnings - so again if you want liquidity why put it in a Roth IRA, that's not what it is there for. YOu pay additional taxes/penaltties for touching any qualified earnings.

You put 10,000 in a Roth IRA for liquidity purposes, you make 10% in a year so you have 11,000. YOu put your money out to purchase a car, you get hit with taxes on the 1,000 plus a penality (which i think is still 10% or something).

Yeah but the point is to not touch the earnings. You can pull any contributions without any penalty at any time.

In your example you can pull the 10k out n leave the 1k earnings in with no penalty. See where I’m going? So earnings (which if you just track the market will get you 8-12% on average annually) stay in to compound and grow. And you can obv put money back into the Roth. It can be an option for an emergency fund stash.

 

[Perfectson]

Yeah but the point is to not touch the earnings. You can pull any contributions without any penalty at any time.

In your example you can pull the 10k out n leave the 1k earnings in with no penalty. See where I’m going? So earnings (which if you just track the market will get you 8-12% on average annually) stay in to compound and grow. And you can obv put money back into the Roth. It can be an option for an emergency fund stash.

you can do that in any brokerage account, there's no reason to have a roth IRA if you need liquidity - because of the fact that you don't know if you will need the earnings. Why would you leave $1k in if you need $11k for the car lol. IRA is a retirement account, meaning you don't expect to touch, it should be treated as an illiquid account.

 

[Truefan31]

you can do that in any brokerage account, there's no reason to have a roth IRA if you need liquidity - because of the fact that you don't know if you will need the earnings. Why would you leave $1k in if you need $11k for the car lol. IRA is a retirement account, meaning you don't expect to touch, it should be treated as an illiquid account.

I understand what you're saying, and I agree best case scenario a Roth IRA should not be touched (I don't touch mine, and i have a separate emergency fund). But many are not as disciplined, and it's an option for savings either way especially over just having it in a savings account not making any money at all. You would leave the 1k because that's your earnings, and to avoid penalties/taxes. For emergencies, you'd have access up to 10k w/o penalties. I wouldn't take it out for anything but the utmost emergencies (certainly not for a car). On top of that, brokerage accounts can charge fees for withdrawals, especially when selling off assets, and are subject to capital gains tax as well.

 

[Perfectson]

I understand what you're saying, and I agree best case scenario a Roth IRA should not be touched (I don't touch mine, and i have a separate emergency fund). But many are not as disciplined, and it's an option for savings either way especially over just having it in a savings account not making any money at all. You would leave the 1k because that's your earnings, and to avoid penalties/taxes. For emergencies, you'd have access up to 10k w/o penalties. I wouldn't take it out for anything but the utmost emergencies (certainly not for a car). On top of that, brokerage accounts can charge fees for withdrawals, especially when selling off assets, and are subject to capital gains tax as well.

I'm sure there are some brokerage accounts that charge fees for withdrawals but most of the better ones don't. The selling off assets I'm assuming you're talking about commissions which would be in the ROTH IRA too.

I mean I just don't see the purposes for Roths unless it's how you're doing it and it's for retirement and maybe something crazy happens and you have to dip into it before you're 59 1/2. I have Roths' from when i first started investing but since then (plus i don't qualify anymore) it's been maxing out the 401k and keeping my non-retirement money in several types of asset classes.

You should have at least 3 liquid accounts (1 checking for monthly bills, 1 savings for more emergencies short term, and something like a mutual fund or cd where you may not have access to the funds for 3-4 days after selling.