Dave: Hi, Ken and Daria. This is Dave. My son recently started his first full-time job. However, he is not eligible to participate in his company’s 401K plan until he’s been there for at least three years which he probably won’t be. What would you advise for a new investor that would get him investing regularly and still saving as an alternative to a 401K?
Ken: Hey, Dave. Thanks. Good question. A lot of people have asked that in the past Dave and that is simple it is.
Daria: Not just for their children but for themselves.
Ken: Yeah, absolutely as we want—
Daria: So the answer is the same whether you’re you know what a kid starting out in a career or somebody who’s just switch jobs and face with this dilemma.
Ken: Exactly right, you know you want to go into a qualified plan like a 401K but you don’t qualify yet but you got money and you want to get started, I would say maybe you may agree or disagree. I say a Roth IRA.
Daria: I absolutely agree and particularly for the young people because should something crop up where your son needs as much as I don’t like to see people touch their retirement plans. If he’s put after cash dollars into that Roth IRA and they’ve remained there for five years, he could if he needed to remove and anybody in a Roth IRA.
If you leave the original contribution of after tax money in their for five years then if you do need to tap it you can let the tax free part continue to earn in whatever investment you put it in and you can withdraw the original in a son’s case $4000.00. If you’re over 50, you can catch up by putting $5000.00 this year into it. You can remove it if you need to for an emergency so I like that a lot.
Ken: Dave, Roth IRA.
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