A traditional IRA allows you to contribute with pre-tax dollars and pay taxes on withdrawals in retirement, while a Roth IRA allows you to take tax-free withdrawals as a retiree, although you will have to contribute with after-tax dollars. Provided your income isn't too high, you can make tax-advantaged contributions to these accounts this year, up to a total limit of $7,500 if you're under 50 or a limit of $8,600 if you're 50 or older and eligible for catch-up contributions.
They know that Dave would say yes, if you have the cash to pay off the mortgage, you should absolutely do so, and free yourself from debt. However, this individual also recognizes the opportunity this cash presents. As they look to sell a second home in 2026, they know that the proceeds from this sale, along with some other funds set aside, will be sufficient to pay off their primary mortgage.
Even small optimizations can become meaningful. Assuming a $5,000 initial investment and annual $5,000 contributions for 25 years, the difference in improving your IRR just 1% and going from 8% to 9% annual returns results in nearly $67,000 more in your retirement account. So it's worth spending a little extra time to make sure you're getting the most out of your Roth IRA by understanding all the various benefits and strategies.
I can't offer any suggestions on what to do with the money if I don't know more information about someone's finances. The advice for managing the $800k Roth IRA and $400k money market account will be different if someone spends $5,000 per month or $20,000 per month. The Redditor is earning $40,000 per year, which comes to roughly $3,333 per month before taxes.
One of the most important decisions anyone has to make in achieving their financial goals is how to invest their money. This might sound like something you can decide in just a few minutes, but let this be a reminder that any decision now can have long-standing consequences, so you have to decide carefully what your first or next move is going to be.
