What is a reasonable rate of return and fee structure for a Roth IRA?
A Roth IRA is just an account wrapper.  Inside a Roth IRA you can have a plain 0.1% savings account, or a brokerage account, or an annuity or whatever.  There's no rate of return for a Roth IRA. That particular calculator seems to assume you'll be wrapping a brokerage account in a Roth IRA and investing in the stock market.  Over a long period 6% is probably a reasonable rate of return considering the S&P 500 has returned about 7% over the last decade.
"The fair price of a stock is the present value of its future payments.  That means the stock you have described would have a ""fair"" value that is quite high and you wouldn't be able to put much of it in your 401(k) or IRA. The IRS requires that ""fair value"" be used for calculating the value of IRA and 401(k) assets. Of course, if the stock is not publicly traded, then there's not an obvious price for it.  I'm sure in the past people have said they spent a small amount of money for assets that are actually worth much more in order to get around IRS limits.  This is illegal. The IRS can and sometimes will prosecute people for this. In order to address abuses of the system by inclusion of hard to value assets in retirement accounts, the IRS has additional reporting requirements for these assets (nonpublic stock, partnerships, real estate, unusual options, etc.) and those reporting requirements became more stringent in 2015.  In other words, they are trying to clamp down on it. There are also likely problems with prohibitions against ""self-dealing"" involved here, depending on the specifics of the situation you are describing." With a Roth IRA, you can withdraw the contributions at any time without penalty as long as you don't withdraw the earnings/interest. There are some circumstances where you can withdraw the earnings such as disability (and maybe first home). Also, the Roth IRA doesn't need to go through your employer and I wouldn't do it through your employer. I have mine setup through Fidelity though I'm not sure if they have any guaranteed 3% return unless it was a CD. All of mine is in stocks. Your wife could also setup a Roth IRA so over 2 years, you could contribute $20,000. If I was you, I would just max out any 403-b matches (which you surely are at 25% of gross income) and then save my down payment money in a normal money market/savings account. You are doing good contributing almost 25% to the 403-b. There are also some income limitations on Roth IRAs. I believe for a married couple, it is $160k. Craig touched on it, but let me expand on the point. Deposits, by definition, are withheld at your marginal rate. And since you can choose Roth vs Traditional right till filing time, you know with certainty the rate you are at each year.  Absent any other retirement income, i.e. no pension, and absent an incredibly major change to our tax code, I know your starting rate, zero. The first $10K or so per person is part of their standard deduction and exemption. For a couple, the next $18k is taxed at 10%, and so on. Let me stop here to expand this important point. This is $38,000 for the couple, and the tax on it is less than $1900. 5%. There is no 5% bracket of course. It's the first $20K with zero tax, and that first $18,000 taxed at 10%. That $38,000 takes nearly $1M in pretax accounts to offer as an annual withdrawal. The 15% bracket starts after this, and applies to the next $57K of withdrawals each year. Over $95K in gross withdrawals of pretax money, and you still aren't in the 25% bracket.  This is why 100% in traditional, or 100% in Roth aren't either ideal. I continue to offer the example I consider more optimizing - using Roth for income that would otherwise be taxed at 15%, but going pretax when you hit 25%. Then at retirement, you withdraw enough traditional to just stay at 10 or 15% and Roth for the rest.  It would be a shame to retire 100% Roth and realize you paid 25% but now have no income to use up those lower brackets.  Oddly, time value of money isn't part of my analysis. It makes no difference. And note, the exact numbers do change a bit each year for inflation. There's a also a good chance the exemptions goes away in favor of a huge increased standard deduction. The idea behind a Roth IRA is taxes will go up in the future so you are best off paying less in taxes now than in the future, which is why Roth IRAs are contributed to with post-tax dollars whereas traditional IRAs are contributed to with pre-tax dollars. The theoritical advantage comes when you want to withdrawal your money. With the traditional IRA, when you withdrawal money, you pay ordinary income tax on all withdrawals. With a Roth IRA, all withdrawals (after the age of 59 1/2) are tax free, including any gains you may have made. To illistrate, with a very simple example, assume you make $50,000 and your IRA grows at 5% for 40 years. Traditional IRA - $5,000 Roth IRA - $3,750 ($5,000 after taxes) Traditional IRA - $604,000 Roth IRA - $453,000 Traditional IRA - $604,000 / 15 = $40,266 * 75% (25% tax) = $30,200 / year Roth IRA - $453,000 / 15 = $30,200/ year First, this was not a contrived example and I was surprised the numbers worked out this way. Second, as you can see with this example there is really no advantage either way unless you by into the theory of higher taxes in the future. Something that's come up in comments and been alluded to in answers, but not explicit as far as I can tell: Even if your marginal tax rate now were equal to your marginal tax rate in retirement, or even lower, a traditional IRA may have advantages.  That's because it's your effective tax rate that matters on withdrawls. (Based on TY 2014, single person, but applies at higher numbers for other arrangements): You pay 0 taxes on the first $6200 of income, and then pay 10% on the next $9075, then 15% on $27825, then 25% on the total amount over that up to $89530, etc.  As such, even if your marginal rate is 25% (say you earn $80k), your effective rate is much less: for example, $80k income, you pay taxes on $73800.  That ends up being $14,600, for an effective rate in total of 17.9%. Let's say you had the same salary, $80k, from 20 to 65, and for 45 years saved up 10k a year, plus earned enough returns to pay you out $80k a year in retirement.  In a Roth, you pay 25% on all $10k.  In a traditional, you save that $2500 a year (because it comes off the top, the amount over $36900), and then pay 17.9% during retirement (your effective tax rate, because it's the amount in total that matters).   So for Roth you had 7500*(returns), while for Traditional the correct amount isn't 10k*(returns)*0.75, but 10k*(returns)*0.821.  You make the difference between .75 and .82 back even with the identical income.  [Of course, if your $10k would take you down a marginal bracket, then it also has an 'effective' tax rate of something between the two rates.] Thus, Roth makes sense if you expect your effective tax rate to be higher in retirement than it is now.  This is very possible, still, because for people like me with a mortgage, high property taxes, two kids, and student loans, my marginal tax rate is pretty low - even with a reasonably nice salary I still pay 15% on the stuff that's heading into my IRA.  (Sadly, my employer has only a traditional 401k, but they also contribute to it without requiring a match so I won't complain too much.)  Since I expect my eventual tax rate to be in that 18-20% at a minimum, I'd benefit from a Roth IRA right now. This matters more for people in the middle brackets - earning high 5 figure salaries as individuals or low 6 figure as a couple - because the big difference is relevant when a large percentage of your income is in the 15% and below brackets.  If you're earning $200k, then so much of your income is taxed at 28-33% it doesn't make nearly as much of a difference, and odds are you can play various tricks when you're retiring to avoid having as high of a tax rate. Couple of factors here to consider: 1) The savings vehicle  2) The investments  Savings Vehicle: Roth IRAs allow you the flexibility to save for retirement and/or your house. Each person can save up to $5,500 in a Roth and you can withdraw your principal at anytime without penalty.  (There is a special clause for first time home buyers; however, it limits the amount to $10k per person.  Given your estimate of $750k and history of putting down 20%.  It would require a bit more.)  The only thing is that you can't touch the growth or interest. When you do max out your Roth IRA, it may make sense for you to open a brokerage account (401Ks often have multiple steps in order to convert or withdraw money for your down payment) Investments: Given your timeline (5-7 years) your investments would be more conservative. (More fixed income)  While you should stay diversified (both fixed income and equity), the conservative portfolio will allow less fluctuation in your portfolio value while allowing some growth potential. The first problem with your analysis is that you are not comparing equivalent contributions. The deductible Traditional IRA contribution is in terms of pre-tax money, whereas the Roth IRA contribution is in terms of post-tax money. A certain nominal amount of pre-tax money is equivalent to a smaller nominal amount of post-tax money, because taxes are taken out of it. For a fair comparison, you need to start with the same amount of pre-tax money being taken out of your wages. If you start with $1000 being taken out of your pre-tax wages, the deductible Traditional IRA contribution will be $1000, but your Roth IRA contribution will be $750, because 25% of it went to paying taxes. If you go through the calculation, you will see that after you withdraw it (and 25% taxes are paid in the Traditional case), you will be left with the exact same amount of money in your hand at the end in both cases. Even though you see that you end up with the same amount of money, you may still be confused because you paid different nominal amounts in taxes. That's the second problem with your analysis -- you are comparing the nominal amounts of taxes paid at different times. You are missing the time value of money. Would you rather pay $1000 of taxes today or $1001 of taxes in 10 years? Of course you would rather the latter, even though it is a higher nominal amount. A given amount of money now has the same value to you now as a bigger amount of money later. If I invest a given amount of money now, and it grows in to a bigger amount of money later, then that bigger amount of money later has the same value as the original contribution now. So the 25% tax on the contribution now is equivalent to the 25% tax on the total value later, even though the latter is a much bigger nominal amount. Another way to think about it is that you could have taken that 25% tax you paid now, and instead invest it, let it grow, and pay that result (which will still be 25% of the total later) in taxes later. You get to keep the remaining 75% of your investment either way. You are simply investing on behalf of the government the part of the money you would have paid them, and paying them the result of investing that portion of the money later. I'm concerned about your extreme focus on Roth. In today's dollars it would take nearly $2 million to produce enough of an annual withdrawal to fill the 15% bracket. If you are able to fund both 401(k)s and 2 IRAs (total $43K) you're clearly in the 25% bracket or higher. If you retire 100% with Roth savings, and little to no pretax money, you miss the opportunity to receive withdrawals at zero(1), 10, and 15% brackets. Missing this isn't much better than having too much pretax and being in a higher bracket at retirement.  One factor often overlooked is that few people manage a working life with no gaps. During times when income is lower for whatever reason, it's a great time to convert a bit to Roth.  (1)by zero bracket, I mean the combined standard deduction and exemptions. For two people this is currently (for 2017) $20,800 total. And it goes up a bit most years. Fast Forward 40 - 45 years, you're 70.5. You must take out ~5% from your Traditional IRA. If that was a Roth, you take out as much as you need (within reason) when you need it with zero tax consequences. I don't know (and don't care) whether they'll change the Roth tax exclusion in 40 years. It's almost guaranteed that the rate on the Roth will be less than the regular income status of a Traditional IRA. Most likely we'll have a value added tax (sales tax) then. Possibly even a Wealth Tax. The former doesn't care where the money comes from (source neutral) the latter means you loose more (probably) of that 2.2 MM than the 1.7. Finally, if you're planning on 10%/yr over 40 yrs, good luck! But that's crazy wild speculation and you're likely to be disappointed. If you're that good at picking winners, then why stop at 10%? Money makes money. Your rate of return should increase as your net worth increases. So, you should be able to pick better opportunities with 2.2 million than with a paltry 1.65 MM. Whether or not it's reasonable is a matter of opinion, but there are certainly cheaper options out there. It does seem strange to me that your credit union charges a percentage of your assets rather than a flat fee since they shouldn't have to do any more work based on how much money you have invested. I would look into rolling over your IRA to Vanguard or Fidelity. Neither charge administrative fees, and they offer no-load and no-transaction fee funds with low expenses. If you went with Fidelity directly, you'd be bypassing the middle man (your credit union) and their additional administrative fees. Vanguard tends to offer even cheaper funds. Half VTI (Vanguard Total Stock Market ETF) and half VEU (Vanguard FTSE All-World ex-US ETF), and stop futzing.  The US is roughly half the world market cap so this is like a total world equity index.  Very low costs. VTI Expense ratio is 0.04% as of 04/27/2017. I don't know what you mean by RSG, but it could be either a waste processor or a gold miner. Either way it seems kind of speculative to hold even 10% of your wealth. "Couple points: 1) Since the Roth is after tax, you can effectively contribute more than you could with the Traditional IRA before hitting the limits. So in your example, if you had extra money you wanted to invest in an IRA, you could invest up to $1,750 more into the Roth but only $500 more into the Traditional (current limits are $5,500 per year for single filers under 50). Your example assumes that you have exactly $3,750 in spare money looking for an IRA home.  2) The contributions (but not earnings) can be withdrawn from the Roth at any time, penalty and tax free.  3) The tax rate ""lock-in"" can be significant, especially early on when you are at a relatively low tax bracket, say 15%, but expect to be higher at retirement.  4) Traditional IRAs and 401(k) are taxed as ordinary income, so you go through the tax brackets. Even if the marginal rate is 25%, the effective rate may be lower. If you have a Roth, conceivably you could reduce the amount you need to withdrawal from the Trad IRA/401(k) to reduce the effective tax rate on those (of course subject to minimum distributions and all that). This is more an argument to have a mix of pre- and post-tax retirement accounts than strictly a pro-Roth reason." Generally, you have 60 days to return funds.   If you've been stowing away money in to a Roth IRA and an emergency strikes you pull out contributions sufficient to tackle the emergency while leaving at least the earnings in there.  You've never paid taxes on these earnings and the earnings will continue to grow tax free.   If you've been stowing away money in a vanilla taxable account and an emergency strikes you pull out whatever amount to tackle the emergency.  You've been paying taxes on the earnings all along but there's no paperwork. You can't replace the money in the Roth IRA (outside the 60 day limit except for some specific same year rules that you should iron out with your custodian) but you also haven't lost anything.  Either way in the event of an emergency the funds are removed from an account, but in one case you haven't been paying taxes on gains. IF you want to go the route of a Roth IRA wrapper for your emergency fund you shouldn't be touching the funds for small events, tires for your car and the like.  If your goal is to juice the tax free nature of the Roth IRA wrapper for as long as you can then repurpose the money for retirement if you never experienced an emergency with the understanding that you may have to gut the account in an emergency, that's fine.  If you expect money to routinely come in and out of the account a Roth IRA is a horrible vehicle. "In a Roth IRA scenario, this $5,000 would be reduced to $3,750 if we assume a (nice and round) 25% tax rate. For the Traditional IRA, the full $5,000 would be invested. No, that's not how it works.  Taxes aren't removed from your Roth account.  You'll have $5,000 invested either way.  The difference is that you'll have a tax deduction if you invest in a traditional IRA, but not a Roth. So you'll ""save"" $1,250 in taxes up front if you invest in a traditional IRA versus a Roth. The flip side is when you withdraw the money.  Since you've already paid tax on the Roth investment, and it grows tax free, you'll pay no tax when you withdraw it.  But you'll pay tax on the investment and the gains when you withdraw from a traditional IRA.  Using your numbers, you'd pay tax on $2.2MM from the traditional IRA, but NO TAX on $2.2MM from the Roth. At that point, you've saved over $500,000 in taxes. Now if you invested the tax savings from the traditional IRA and it earned the same amount, then yes, you'd end up in the same place in the end, provided you have the same marginal tax rate.  But I suspect that most don't invest that savings, and if you withdraw significant amount, you'll likely move into higher tax brackets. In your example, suppose you only had $3,750 of ""discretionary"" income that you could put toward retirement.  You could put $5,000 in a traditional IRA (since you'll get a $1,250 tax deduction), or $3,750 in a Roth.  Then your math works out the same.  If you invest the same amount in either, though, the math on the Roth is a no-brainer." "This may be more of a comment than an answer, but it's too long for a comment. Perhaps the Stackexchange Gods will forgive my impudence. That said: Even with the tax penalties, it can be to your advantage to put money into a ""retirement"" account and withdraw it before retirement. The trick is: Is the amount of the tax penalty more than the benefit of untaxed compound growth? For example, just to make up some numbers: Suppose you have $1000 of gross income to invest. You are considering whether to invest in an ordinary, non-tax favored account, or a classic IRA. Either way you will get 10% returns. Your tax rate, both when you put the money in and when you take it out, is 15%. There is a 10% tax penalty for early withdrawal. With an ordinary account you will pay 15% tax off the top, so you are only investing $850. Then each year 15% of your returns are paid in taxes, so your net return is 8.5%. But when you withdraw the money there are no additional taxes. With an IRA you do not pay any taxes up front, so you can invest the entire $1000. You collect 10% each year with no taxes. When you withdraw, you pay 15% plus the 10% penalty equals 25%. So after 5 years, the ordinary account would yield $850 x 1.085^5 = $1504. The IRA would yield $1000 x 1.1^5 x 0.75 = $1208. The tax penalty hurts. You are better to use the ordinary account. But if you could leave your money in for 25 years, then the ordinary account would yield $850 x 1.085^25 = $7687. The IRA would yield $1000 x 1.1^25 x 0.75 = $8126. The IRA, even with the tax penalty, is better. Of course my numbers are just made up. What your tax bracket is, what returns you get, and how long you think you might leave the money in the investment, all vary."