ira or tbills
My son approached me for money to invest in an IRA through his employer. I am wondering if T bills might be better for the next few years? Your thoughts?
Terry Says
Over the long run, the tax deferred growth in an IRA for a young person will bring him far ahead of the temporary higher rates of T-bills. But typically employers don’t sponsor IRAs. They sponsor SEP-IRAs.
Here’s how the IRS describes them:
A SEP-IRA is a traditional IRA that holds contributions made by an employer under a SEP plan. You can both receive employer contributions to a SEP-IRA and make regular, annual contributions to a traditional or Roth IRA.
Now, it IS possible to make additional tax-deductible contributions on the part of the employee, up to the annual limits.
Her’s what the IRS says about those:
If the SEP-IRA permits non-SEP contributions, you can make regular IRA contributions (including IRA catch-up contributions if you are age 50 and older) to your SEP-IRA, up to the maximum annual limit. However, the amount of the regular IRA contribution that you can deduct on your income tax return may be reduced or eliminated due to your participation in the SEP plan.
Just be sure your son knows exactly what kind of plan he is getting into. And the costs of the plan if he decides to make additional contributions. To the extent it is permitted under the tax law, he might be better off opening an IRA at a different place — Vanguard or Fidelity, because the boss is not matching his contribution in the SEP-IRA.
