401k's IRA's and retirement

llg, PhD, RN · Jun 22, 2016

Contribute to the retirement plan and take the 2% match. Don't fail to take the money they are willing to give you. Even if it is a relatively small amount of money, it is better than nothing. It will build up over time. There is no problem having multiple accounts with different agencies. When you eventually leave that agency, you can roll those funds over into another IRA ... so that eventually, all of your little IRA's get combined into one big account.

Please do yourself a favor and don't throw away the free money.

As for which type of account, I can't say without more information ... but either option is much better than doing nothing.

**NICU Guy, BSN, RN** · Jun 22, 2016

ROTH IRA is the best for retirement. You don't get a deduction on your yearly taxes, but all of the dividends/interest are not taxed when you withdraw it. With a traditional IRA you get a tax deduction when you deposit the money, but pay taxes on the interest/dividends when you withdraw.

DieselBurps · Jun 22, 2016

Thanks for the responses so far.

lig, I am going to take the company 401k and their match. Like you said it's better than doing nothing.

Guy in Babyland, Roth would make sense I think since I am already only taxed on my hourly traveling wage and not my per diem etc. so that I think puts me in a lower tax bracket, so maybe a traditional IRA with the tax deduction might not be much help, still not sure though. I will know more when I do my taxes next year. I have also heard that it's possible to switch a traditional IRA over to a Roth later, I also don't anticipate my earnings in retirement putting me over the 15% tax bracket.

NedRN · Jun 23, 2016

There are a number of points to make here:

1. 2% match is complete BS - it is a retention ploy to try to get you to stay with them. They could easily offer you a similar amount more hourly and that is what I would ask for. The chances are good that the match requires vesting and you will never get the match credited to your account. Do the math - the gain is not worth the hassle and freedom to pick your agency.

2. There is little point to a 401 over an IRA unless you plan to put more than $5,500 a year into a retirement account (which you should). So if you really want to save 10 to 20 percent of your income, finding an agency that will allow large contributions is a big plus. Even just one assignment a year. 401 elective contributions are currently at $18,000 a year. Do both for over 23K a year which should be pretty painless for a full time traveler (depending on your current debt load and family costs).

3. Virtually all agency 401s have hidden fees or loads. I always take the money market option which will preserve your capital. Once the assignment is over, I roll it over into a self directed IRA (no charge for doing so). Choose index funds by Vanguard or Fidelity for the lowest cost structure and risk.

4. I have both Roth and regular 401s and IRAs. I would go regular for an agency 401. Yes, your income is relatively low, but it will likely be even lower at retirement. An advantage of regular accounts is that that money you will ultimately have to pay taxes on is sitting in your retirement account and growing. If you did the Roth and paid income taxes on it in the current year, you no longer have that capital to invest. Investing other people's money is a great strategy, in this case the IRS's money.

There is one more cool thing about having Roths and regular retirement accounts. Let's say one year you only work one assignment (or less). That is the year to recharacterize a regular account as a Roth for little to no additional taxes owed. You have just removed all the current and future tax liability on the conversion amount!

I contribute the max amount to regular retirement accounts I can in high income years and in low income years I convert 10 to 20K to a Roth. Sort of like income averaging on steroids!

DieselBurps · Jun 23, 2016

Thanks Ned, I was hoping you would comment since I have seen you mention retirement accounts passingly before.

I think I get what you are saying that I should do a traditional IRA over a Roth and contribute the max at $5,500 a year, and then in low income years (which are likely because I like to travel outside of work) I can move those funds over to a Roth IRA and avoid paying income tax on them at a later date when I retire?

I should wait to start a 401k until I find an agency that offers one that will allow large contributions?

Sorry about all the questions, I am new to investing and trying to learn as much as I can and make the best decisions.

NedRN · Jun 23, 2016

You can't start a 401 without an employer. It will be a rare employer that allows you to make large contributions, but some smaller ones may. But even small 401s will allow you to increase your annual retirement contributions over the low limits of an IRA. Just roll them over (close them) frequently to your self directed IRA. That might be a bit confusing but those IRA annual contribution limits are not affected by funds coming in from other retirement accounts (like a 401 rollover).

I've given you my thoughts about Roth and standard retirement accounts. There are some that argue strongly for just Roth. Do some reading about them. There are lots of forums where you can get expert advice - this one is mostly nurses! All nurses even.

Everyone has different ideas on investment practices and account types, but the earlier you can salt away money, the better off you will be when you retire.

llg, PhD, RN · Jun 23, 2016

Don't wait until everything is perfect to start. Even if amounts are small to begin with, do it to start your funds growing. That's better than nothing and will help you establish a habit of saving regularly.

It's not all about the math. There is a strong psychological aspect to saving for retirement. People who delay while they wait for conditions to be perfect usually end up delaying again ... and again ... and again ... because the "time to save" is rarely perfect. There is almost always some reason to delay it again (or should I say, an excuse, to delay again?)

Just start. You can always modify your strategy as you learn more and/or other opportunities arise.

NorCalKid · Jun 28, 2016

You can't start a 401 without an employer. It will be a rare employer that allows you to make large contributions, but some smaller ones may. But even small 401s will allow you to increase your annual retirement contributions over the low limits of an IRA. Just roll them over (close them) frequently to your self directed IRA. That might be a bit confusing but those IRA annual contribution limits are not affected by funds coming in from other retirement accounts (like a 401 rollover).
I've given you my thoughts about Roth and standard retirement accounts. There are some that argue strongly for just Roth. Do some reading about them. There are lots of forums where you can get expert advice - this one is mostly nurses! All nurses even.
Everyone has different ideas on investment practices and account types, but the earlier you can salt away money, the better off you will be when you retire.

I didn't know I could roll over like that, thanks

Problem I see with ROTH only is the low limits (5500). If your doing ROTH only you're probably not contributing enough. At least with the 403b(I'm not traveling yet) I can contribute 18k($700 a pay period) and can still throw 5500 into a ROTH if I have it left over at the end of the year.

NedRN · Jun 28, 2016

Those IRA contribution limits are only for new contributions. You can rollover your 401/403 accounts to them at any time and any amount.