Today, I'm doing something a little different and will be introducing my husband as a guest writer! Chris is not a financial advisor by profession but has spent extensive amounts of time (believe me on that) researching this concept and digging for every possible way he can find to save money for our retirement. If you're interested in hearing about how putting money into your 401k may not be saving you as much money as you think and may end up costing you much more than you know, keep reading! There is an alternative that is available to you and your spouse that just isn't utilized nearly enough!

This is my hubby Chris! I am going to give him the reins and hope you'll give him a chance and read what he has to say! He will tell you that he is not a writer, but I think he doesn't give himself enough credit. He loves to help others reach their fullest potential and live their best lives. Maybe he can help you today with these tips.

Hi everyone! I'm just going to dive right into how Roth IRAs can change your retirement so you can retire the way you want to…

The first thing I want to say is that I DO NOT contribute to my company's 401K becuase they do not match my contribution. If your company does match, then contribute to the 401k up to their match and all of the rest should be placed in a ROTH IRA. 

Here are 7 important points that discuss the benefit of a ROTH IRA vs. a 401k:

Important Point 1: Did you know that each person can have their own Roth IRA?  You read all over the internet that you can only contribute $5500.  That's true, but really it is $11,000 if you are married.  You can contribute $5500 for you and $5500 for your spouse regardless of job or income. However, if you make more than $199k/year there is a cap so be sure to look into that. SoFi has some great info which can help you make an informed decision, as well.

Important Point 2: Did you know that all earnings in a Roth IRA are tax free when taken out after age 59.5!  That means, if you put $100 in your Roth IRA and make $10 in interest, you can withdrawal that $10 after age 59.5, tax free.  If you did that with a 401K, you would have to pay taxes on that $10.  If you have $1,000,000 in your Roth IRA, you can take all $1,000,000 out WITHOUT TAXES…BOMB…THAT’S AWESOME! (I was tempted to edit this. I really was very tempted, but that's just Chris lingo!)

Important Point 3: Did you know that if you retire before 59.5 years old, you can take out the money you put in without a penalty!  Wait, what? If I did that with a 401K, I would have to pay a 10% penalty and lose a lot of money.  Ouch.  You might want to reconsider retiring early if you only have a 401K.

Important Point 4: Did you know that when your kids go to college and apply for financial aid, one of the fields on the form asks: how much money did you contribute to your 401K that calendar year? This information will hurt how much financial assistance your child receives.  However, if you have that money tucked away in a Roth IRA, you do not have to list that on the form. 

Important Point 5: Did you know that the more taxable income you have in retirement, the more money you pay for health insurance?  WHAT?  Yes, that is correct.  If you take out more taxable money in retirement (ie 401k), you will have to pay more for secondary health insurance.  Hope your money is not in a 401K.

Important Point 6: Did you know that the more money you withdrawal from your 401K in retirement, the less social security you get? NO WAY!!!  That’s because the money from the 401K is taxable.  Now if you took that out of your Roth IRA, your social security is not affected.  The SSA takes $1 out of every $2 you earn that is over their specified limit which is VERY LOW at $14,160. I'm not sure anyone can live off that number, therefore almost everyone is going to be penalized in a huge way. 

Important Point 7: Did you know that when you change jobs, all the money in your 401K in your previous company can be moved into your Roth IRA?  What about the $5500 limit?  Well you can move the money in a rollover and it doesn’t count against your $5500 limit.  Then when you retire, that money and it's earnings are tax free.  Yes you do pay extra in taxes now, but you would have huge benefits in retirements.

There are even more benefits to Roth IRAs that are not even mentioned within this blog.  If you know of any, please feel free to leave a comment below. Maybe you feel differently altogether and that is ok too! I love to discuss different opinions and this is by no means the "end all" method for preparing for retirement but it is my hope that it can save someone out there thousands of dollars in taxes and penalties one day! You really do have more options than what you are led to believe. Feel free to share this with everyone you know and "share the wealth" so to speak!

Blessings from Chris and Lindsey,