My daughter is looking at investments and retirement. She is 30 years old and has a municipal position with a vested pension plan. She is looking at doing some of her own additional investments. She is being told to do Deferred Compensation instead of a 401k, Vanguard or Roth. What is your recommendation for her best option(s). We are telling her to do Vanguard or Roth. We feel like we got burned when we withdrew our Deferred Compensation with a heavy tax bill.
A lot depends on how that “deferred compensation” is structured. For a young person, I’d go for the Roth if she qualifies based on income. For 2018, the income limits to qualify for a Roth have increased slightly: For single taxpayers, the phaseout range is now $120,000 to $135,000, up from $118,000 to $133,000. And for married couples filing jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000.
It makes sense to diversify her retirement savings. And she will never be required to take money out of the Roth — if the government keeps its promise. But when she does, it will all come out tax-free!