I have always been skeptical about financial institutions even before anyone mentioned the "run on the banks." When it comes to saving for my retirement, I have set up four different retirement accounts with three separate brokerage firms. In addition to a 401(k) and Roth 401(k), I have a Roth IRA and a traditional IRA. Although it's somewhat cumbersome to keep track of four different passwords and accounts, it's worth it to me to have the peace of mind. I know that even if the funds in one of my accounts has dismal returns or if the brokerage firm goes bankrupt, I'll still have three other retirement accounts. I ended up with four different retirement accounts as my work situation evolved over the years.
Starting with a Roth IRA
My first retirement account was a Roth IRA. I opened it when I was self-employed in the 1990s. I started with a discount brokerage firm that offered online trading. I was extremely comfortable using the brokerage firm's trading tools. I love having a Roth IRA because I know I will be able to withdrawal the money without paying taxes when I'm older. I also like being able to use some of the money to help pay for my sons' college expenses.
Adding a 401(k) account
When I started a full-time job in my 30s, I opened a 401(k) account. At the time, my company matched a portion of what I contributed. Although I no longer get a company match, I'm a fan of the 401(k). I don't have to do any work. I simply pick a few mutual funds and let the money be automatically deducted out of my paycheck every month.
Opting for the Roth 401(k)
After working for my company for more than 5 years, they began offering a 401(k) Roth. I immediately started putting a higher percentage into the Roth 401(k) because I won't have to pay taxes on the money I take out in retirement. I don't have much money in my 401(k) at this time, but I'm planning to increase the percentage allocated for that account each year.
Having a traditional IRA
The reason I have a traditional IRA or rollover IRA is because the company I worked for changed hands. Instead of rolling my 401(k) money over into the new company's 401(k), I wanted to have the freedom to control my own money. I still contribute to the new company's 401(k), but I love having a Rollover IRA that I can manage myself. I am able to shift the money out of the market for periods of time when I think there might be a dramatic drop in the stock market. I can choose to invest in exchange traded funds, individual stocks and other investments within the account.
I definitely prefer the Roth IRA and the Roth 401(k) over my other two accounts. However, I can't say whether the IRA or 401(k) will do better over the long haul. It's a lot of responsibility to manage my accounts. I may not do as well as the experts, but it's nice to have a portion of my retirement money that I can control.
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More from this contributor:
- Banking & Budgeting
- Roth IRA
- traditional IRA