Feb 15

I’ve been told continuously to start one (i’m eighteen) but I’m not sure where to begin, what happens when I begin, and what happens at the end. Can someone explain it to me in lame mans terms?

6 comments so far...

  • Ed Said on February 16th, 2010 at 12:05 am:

    There are basically two retirement plans. A Traditional IRA and a ROTH IRA. On the traditional you dont pay taxes until you retire (bad thing about it is that you dont know what the tax rate is going to be in the future. It could be higher than what it is now).

    A ROTH IRA you pay taxes upfront so when you retire you dont have to pay taxes. ROTH IRAs are better because of that.

    Check out this retirement calculator. It calculates how much money you will have if you continue to save for a period of time.


    Start young. Go to DaveRamsey.com and search for “Ben and Arthur invest”

    You can retire a millionare if you start now!


  • Dwight A B Said on February 16th, 2010 at 12:13 am:

    you put in up to 4,000 a year and invest it mutual funds (or any investment vehicle.) You leave the money in until you’re retirement age (at least 59 1/2 years old).

    The mutual funds grow in value over time ( the stock market returns have averaged 10 percent per year since early 1900′s), When you retire, you get the money PLUS all of the earnings over the year 100% TAX FREE!!!!!

  • Bill Hicks Said on February 16th, 2010 at 12:32 am:

    Basically think of the Roth IRA as tax protected basket. The money you put in to the IRA will never be taxed. It can grow tax free until you need to take it our for retirement (or few special situation such as illness, first time home purchase and education.) This means you will have income when you are older that is not taxed no matter what the tax rates are at the time.
    Once in the Roth IRA you can choose an investment that grows over time. Find one or few low cost choices (Vanguard is a pretty good place to start).
    Good for you to think about this at 18. Time is the biggest factor in your favor.
    If you start now at 100 per month at 8% it will be worth $566854

  • Gary Said on February 16th, 2010 at 1:26 am:

    Roth IRA is a retirement savings account. You can contribute up to $5,000 this year. When you contribute you are contributing money that has been already been taxed.

    You can start to withdraw money from that account when you are 59.5 and you won’t get taxed on any distribution or withdraws. One exception is that you can withdraw $10,000 without any penalties for your first home, though not a good idea.

    You can start by opening an account with E-Trade or Charles Schwab. If you have a job, just put $50 from every paycheck you receive into your Roth IRA to start building funds. When you have enough, you can buy stocks, mutual funds or bonds.

    Since you are only 18, you want to be aggressive on your investments.

    Listen to those who are telling you to open one up. You need to think about your retirement now and not later. Each year that you don’t open one up can make the difference living at a very nice place or working until you die.

  • avmed Said on February 21st, 2010 at 2:38 pm:

    I would guess that treasury yeilds aren’t going lower. They are at historical lows. The govenment is not going to reduce spending. Obama’s policies will not result in the magnitude of private sector growth required to achieve balance budgets. We will not develop domestic nuclear and natural gas resources. Balance of trade deficits will continue. Fiscal deficits will continue. Default on our outstanding debt through currency debasement is inevitable. Interest rates will rise unless Americans use all of the printed money to by US debt instead of Arab oil and Chinese manufactured goods.

  • florida insurance adjuster Said on February 21st, 2010 at 3:35 pm:

    I just buy corporate bond funds with intermediate target maturities. Corporate bonds are still paying a little bit, and Corporate America is fairly healthy right now. Whether they can keep the bottom line stable with a constantly shrinking customer base (thanks to a shrinking number of gainfully employed people) is a legitimate question, but it’s a stretch to say they can’t service their debt of the next seven years if they are investment-grade now. Even though inflation is a near certainty, we still don’t know when it’s coming, and there’s no point, in my opinion, bailing now when it could be two or three years. In any event, the inflation is much more likely to be Jimmy Carter-style vs. Zimbabwe-style, and Carter-style inflation won’t drive intermediate term bonds down in price anywhere nearly as bad as what you’d call a bubble asset, like a dot-bomb stock or a house out in the Arizona desert. As for treasuries, there’s not much point in investing in them now even without a bubble scare. The returns are so pitiful, you might as well hide the cash in your mattress. TIPS are a fine concept, but you had better have your TIPS in some kind of tax-advantaged account, since the nominal return is taxable. Since the rate on them is essentially zero above inflation, when inflation picks up your economic loss will be the nominal return times your tax rate.

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