Should I Double Max Out My Roth IRA or Invest My $20,000 Elsewhere?

There are plenty of good reasons to love Roth IRAs for retirement savings.

First, these accounts allow you to grow your money completely tax-free. This means that if you invest $100,000, and over time, your balance grows to $1.5 million, you can walk away with a $1.4 million gain without owing the IRS a cent.

Roth IRAs also give you the benefit of tax-free withdrawals in retirement. At that stage of life, it’s nice to not have to worry about paying taxes on your income (or at least that portion of it).

Plus, we don’t know if tax rates will go up in the future. Having money in a Roth IRA protects you from future tax rate increases – at least in the context of that account specifically.

Finally, Roth IRAs do not force savers to take required minimum distributions in retirement like traditional IRAs do. That gives you more flexibility with your money.

In this Reddit post, a 33-year-old asks if they should double max out a Roth IRA with $20,000 they have available. I think they should absolutely do that — but they’ll need to find a home for the rest of their money.

It pays to go all-in on Roth IRAs

The poster here does not share too many details of their financial situation. They mention they own property and have an emergency fund, but they don’t say how much cash savings they have.

Assuming they have a decent emergency fund, it could be a good idea to invest their $20,000 for retirement. At 33, they still have a lot of time for that money to grow.

Roth IRAs can be funded up until the tax deadline each year. So for the 2024 tax year, contributions can be made through April 15, 2025. The poster could make that contribution and then make another one for the 2025 tax year.

But that won’t use up the poster’s $20,000. That’s because Roth IRAs max out at $7,000 for savers under age 50. In both 2024 and 2025. So the poster would need to find another home for their remaining $6,000.

To that end, a taxable brokerage account could be their best bet. Taxable accounts don’t have contribution limits, and they also don’t have restrictions.

Investing your Roth IRA the right way

The poster mentioned that they’d like to take a more aggressive approach to investing. That could mean loading their Roth IRA with a variety of stocks or index funds.

Since they’re fairly young and have a lot of time for their money to grow, they can afford to be aggressive. But it’s important to make sure that no matter what assets their money goes into, that they’re diversifying nicely.

If the poster would rather hold stocks individually, that’s fine. But those stocks should encompass a range of industries. Otherwise, they may want to put at least some of their money into a total stock market fund for broad exposure.

Another thing the poster, and anyone else in a similar boat, may want to do is talk to a financial advisor about how to invest their money.

A financial advisor can help come up with a strategy that aligns with both your goals and risk tolerance. They can also help you figure out where to put your money if you want to invest beyond what a Roth IRA allows for.

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