Max out Roth IRA (after-tax conversion) or I bonds

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runnergirl
Posts: 131
Joined: Thu Nov 04, 2010 1:15 pm

Max out Roth IRA (after-tax conversion) or I bonds

Post by runnergirl »

On top of a $5500 contribution to a Roth IRA, I am also able to deposit approximately $26,000 per year into the Roth via an after-tax 401K conversion. I am already maxing out contributions to the 401-K. Not having the funds to max out both Roth IRA and $20K (joint) in I-bonds, where should my priority be?
rock_marmot3
Posts: 63
Joined: Wed Nov 04, 2009 8:56 am

Re: Max out Roth IRA (after-tax conversion) or I bonds

Post by rock_marmot3 »

Well first of all, you should choose an investment whose risk/return profile matches your goals. If the choice is between investing in equity in your Roth 401k and buying I-Bonds, then that choice should be determined by whether you actually want to buy stocks or bonds.

Assuming that the choice, then, is between two equivalent investments (say, between I-bonds and a TIPS fund in your Roth 401k), then assuming that you can get a relatively low-expense TIPS fund, I'd opt for the Roth, especially if you're investing over a long time horizon. Your income from the I-Bonds will ultimately be taxed, an advantage that it's unlikely that you'll get enough extra yield to make up for.
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tfb
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Re: Max out Roth IRA (after-tax conversion) or I bonds

Post by tfb »

runnergirl wrote: Not having the funds to max out both Roth IRA and $20K (joint) in I-bonds, where should my priority be?
Roth.
Harry Sit, taking a break from the forums.
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