Hello all-
I've been a long time lurker here, and have enjoyed reading your posts for some time. I've recently arrived at a point in my life when it is time to make financial decisions for my retirement. I wanted to lay out my plan and ask your advice in pointing out any flaws or making any suggestions.
I'm 25 years old, making about $23,000 a year, working full time while attending college at night. My company offers a 6% match on the 401K, so that is what I contribute each paycheck. I recently received a substantial inheritance from my great aunt who I never knew. She passed some time ago, but for the longest time the money was wrapped up in some odd real estate deals I honestly don't know much about. None of that matters now, as the inheritance has been released to me. My father has allowed me $30,000 of this inheritance to begin investing. I already have an account open with GMAC which I've been putting bits of my paycheck in. I'd like to move this $30,000 into that account, and in the mean time use a part of that to start a Roth IRA with Vanguard, investing in their Target Retirement 2045 fund.
I have no debt. I own my car and home free and clear. I am single and have no expenses outside school, food, the light bill, and a serious penchant for collecting fountain pens
. My dad will be handling the rest of the inheritance in various CD's and such until I can prove that all the stuff I've learned reading forums on the internet and listening to Clark Howard can pay off
.
My biggest questions are:
1) Can I have both a 401k and a Roth at the same time?
2) I have earned income, as noted above, so do tax laws have any problem with me using this inheritance to contribute to a Roth? I know that when one makes over a certain amount of cash regularly over a year, said person is not eligible for a Roth IRA. However, this inheritance wouldn't count as "earned income", would it? (Of course I'll pay all the necessary taxes on the inheritance)
Thanks all, and in the interest of full disclosure I'm cross posting this over at the Clark Howard forums so I can get lots of different viewpoints and advice.