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URL:  http://boards.fool.com/gtgt-if-i-start-putting-the-maximum-amount-in-23897348.aspx

Subject:  Re: Convince me to put money into a ROTH Date:  3/28/2006  3:07 PM
Author:  SooozFool Number:  50765 of 76388

>>If I start putting the maximum amount in at my age, I think I figured I could have around $400K when I retire. That is not going to do anything 30 years from now!<<

Ah, but . . .

(1) Just because you contribute to a Roth doesn't mean you can't save and invest in other savings and investment vehicles as well. Plus, contribution limits will likely be raised in the future. Plus, if you catch on with an employer who has a Roth 401(k), that'd really enhance the contribution limits.

(2) Earnings inside a Roth grow tax-free and, more important, are withdrawn tax-free in retirement. So the $400K you reference, whatever its buying limitations, is worth a heckuva lot more than $400K in other investment vehicles -- including real estate which, once sold, still generates gains (in most instances) and thus taxes to be paid. The Roth is *real* money; Uncle Sam keeps his mitts out of that pot once you've made your contributions to it. Will it be enough by itself for your needs? Maybe not, but it'll be a very valuable place to stash a part of what you save over your lifetime.

(3) You can open up Roths in all kinds of places, including Vanguard and Fidelity. Because you are young and willing to take risks, perhaps you should consider investments inside a Roth that are better "grown" inside a tax-free environment, such as perhaps real estate investment trusts (REITs), or perhaps shares in an emerging markets stock index (very volatile, but with long-term growth potential). I would also seriously consider target retirement funds, which are funds-of-funds that are more aggressively balanced for those retiring many years from now.

Perhaps you need to think about your total asset allocation picture and goals, and work backwards from there to figure out which investments are better off placed inside a Roth (for the tax-free growth that goes on inside a Roth account), and which are better off held in taxable accounts or a 401K, if you have access to one. What to invest in (which is part of your question) is a different issue from where best to hold that investment (which is also part of your question).
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