When reading the 401K thread...

budgetmom · #1 (**permalink**) 10-07-2006, 03:37 PM

... I realized that even though we are not financially able to save at this point (sad and frustrating), we will be soon. My DH's job doesn't offer any benifits, and I mean any. He doesn't even get overtime after fourty hours, just straight pay. He is also one of only about 5 employees at his company that is a U.S. Citizen. The rest are working with visas. He is searching for another job, but we are unsure of when that job will come through. Since he can not contribute into a 401K plan with his company, what would the best alternatives be? And, could you explain a little bit of each one so I can understand them. I am a total newbie at investing so try to spell it out like a "Dummies Guide to ...", LOL. Thanks.

Ima saver · #2 (**permalink**) 10-07-2006, 03:41 PM

You best bet would be to open a roth IRA. You can open one in your name and/or his name (Youcan have one for each of you) You can put up to $4000 a year into each one. I reccommend a mutual fund, but if you have very little money, you can start one at the bank and later transfer it to a mutual fund.

Ima saver · #3 (**permalink**) 10-07-2006, 04:00 PM

What reading I have done, indicates that a roth ira is usually a better choice for a younger person. Since I started with a regular ira, I now have both.

Mathew Green · #4 (**permalink**) 10-07-2006, 06:58 PM

There's an active thread on this subject in the Investing & Banking forum. Both LuxLiving and _I_ make some good suggestions there, and I also provided links to additional information about 'Traditional' and 'Roth' IRA's.

Hope that helps.

budgetmom · #5 (**permalink**) 10-08-2006, 12:29 AM

Wow, I may be a dummy when it comes to money, but even I know that the alternative is not the way to go! (I'm not saying that the person that posted the thread is a dummy either, so please lets not get any panties in a wad.) So, the guy in the example doubled his money; still it doesn't go very far in the real world unless it is invested in the proper way, right? Thanks Matt for the info. I will start investigating it further for the future. I won't be able to start saving for that kind of cash for a little while, and according to the current number crunch, if our income/ lifestyle stays at it's current state, it would take a year for us to make the funds to be able to contribute into a Roth account. But that won't happen until our debt gets caught up. So, that may take awhile. We are streching every dollar that we can that I know of at this point.

LuxLiving · #6 (**permalink**) 10-08-2006, 09:08 AM

Okay budgetmom, when your husband gets his job that has great benefits and a 401-K and if times are still tight just start out with doing 1% of his income. When you see that you don't really miss it - up it to 2% or more and then keep jumping up to greater increments. You'll be pleasantly surprised at how it begins to add up and you never really miss it all that much!

1)IF you are getting a SMALL tax refund now then you will probably create a wash effect when you do that - your taxable income will go down and the savings mount up. 2)IF you are getting a LARGE tax refund now then you need to have your spouse get his (??whatever the heck number W IRS form (brainfart)) changed at work so you guys get more of your cash in each of his paychecks NOW.

If no. 2 is the case then start chunking that additional money into some online Roth IRAs NOW. Yes, plural - you need one too! One other great thing about the Roth is that when GOD FORBID something happens to you or your spouse then the Roths are directly inheritable without having to cash out of possibly profitable investments at that time. Traditional IRAs are I believe a different ballgame having to be cashed out AND creating a taxable event!

Mathew Green · #7 (**permalink**) 10-08-2006, 08:05 PM

Quote:

Originally Posted by budgetmom

Wow, I may be a dummy when it comes to money, but even I know that the alternative is not the way to go!

You've lost me

I don't believe anyone there or here was seriously suggesting gambling as a good way to invest our money.

I pointed to that thread because it begins with a simple request: "i'm 22 and i know i can do better things with my money then buying a $60 video game twice a month. the thing is when i look at my choices... it's like someone threw me out of a plane and said 'fly'." That's where most of us started from, and the advice in that thread is a good (except for the Las Vegas joke).

BTW: My panties don't get in a wad. I always wear tidy whiteys, except for the ones that are pink because I washed them with a brand new red sweatshirt.

:

TinyFish · #8 (**permalink**) 10-08-2006, 10:56 PM

Just to clarify:

A mutual fund is one way of INVESTING the money that you have in a retirement plan (such as a regular IRA, a Roth IRA, or a 401K.

It has little to do with WHERE you invest it, eg at a bank or otherwise. Though banks will try to push you towards investing in CDs, etc, which are generally not a good choice for long-term investment.

-TinyFish

neatdesign · #9 (**permalink**) 10-09-2006, 03:50 PM

Quote:

Originally Posted by budgetmom

He is also one of only about 5 employees at his company that is a U.S. Citizen. The rest are working with visas.

I'm just curious what this has to do with the 401k issue.

~ Jenney

disneysteve · #10 (**permalink**) 10-09-2006, 04:16 PM

Quote:

Originally Posted by neatdesign

I'm just curious what this has to do with the 401k issue.

~ Jenney

That may be why the company doesn't offer a 401k. I think only US citizens are eligible to contribute to 401k plans. If only 5 employees would be eligible, the employer might feel it isn't worth the trouble.

neatdesign · #11 (**permalink**) 10-13-2006, 06:42 PM

Quote:

Originally Posted by disneysteve

That may be why the company doesn't offer a 401k. I think only US citizens are eligible to contribute to 401k plans.

At the very least, US permanent residents are eligible to participate in 401k plans, 503b plans, open IRAs, etc. There are very few things in day-to-day life that are available to US citizens that aren't available to US permanent residents. Thankfully, retirement plans aren't one of them. It's possible that other foreigners working in the US (H-1bs, J-1s, F-1s, etc.) are eligible as well, but I'm not sure.

Quote:

Originally Posted by disneysteve

If only 5 employees would be eligible, the employer might feel it isn't worth the trouble.

That's very true. However, citizenship is a non-issue, it's simply a numbers thing.

~ Jenney

yellow heel · #12 (**permalink**) 10-14-2006, 04:16 AM

I don't mean to go off topic but if only the husband works, can you open 2 Roth IRA for both husband and wife that does not work?

Did I miss read?

disneysteve · #13 (**permalink**) 10-14-2006, 07:52 AM

Quote:

Originally Posted by yellow heel

I don't mean to go off topic but if only the husband works, can you open 2 Roth IRA for both husband and wife that does not work?

Did I miss read?

Yes, you can open a spousal IRA for a non-working spouse. We did this for my wife years ago while she was still a SAHM.

yellow heel · #14 (**permalink**) 10-15-2006, 04:33 PM

Is spousal IRA a special IRA? or can she just open one like a normal IRA? or do I have to open it for her?

what is SAHM btw?

I appreciate your help!

disneysteve · #15 (**permalink**) 10-15-2006, 04:37 PM

Quote:

Originally Posted by yellow heel

Is spousal IRA a special IRA? or can she just open one like a normal IRA? or do I have to open it for her?

what is SAHM btw?

No. Nothing special about the IRA. You open it the same way as any other IRA.

SAHM= stay at home mom