Apr 19

I’ve just graduated college and started my first full-time job a couple months ago. Lately I’ve been reading articles about Roth IRA’s and how young people should consider them because they can save a huge amount of money by the time they retire with the smallest amount of input (since they’re getting started earlier). I know I’m still young, but I want to set myself up for a comfortable future. I’m making $35k/year salary, but my company does not have a 401K plan (as of yet).

I would like to try putting away $250 a month in order to create a nest egg for when I retire (and maybe allow myself to retire a little earlier?). Is a Roth IRA the way to go, or is there something better I could do with my money to allow it to increase over the years? I don’t know much about this stuff and don’t even know where to start. I do know that IRAs have something to do with investments, which is risky and scares me a little…


9 comments so far...

  • dan Said on April 20th, 2010 at 12:15 am:

    Roth is the best place for someone in your position because it grows tax free and you can even take your principal tax free if you end up needing it. Once you retire (over 59 1/2 years old) the entire amount is yours tax free

    I would put it in a relatively high risk mutual fund because you are young. Over the long term, the stock market has shown in the past to provide the best returns. Because you have decades until retirement, being risky with your money now is a good idea. Later on down the line, you would want to scale back that risk, but not now because you are only 22.

    My advice is to call a mutual fund company like Vanguard, Lincoln, Fidelity, TRowePrice, or American funds to set up an account. They will help you make a choice on which mutual fund to buy into.

  • Chen Said on April 20th, 2010 at 12:34 am:

    YES! A ROTH IRA is a great idea! You pay the tax now and the money grows tax free until you are 59 1/2 (penalties are levied for premature withdrawal).
    Your still young and if you can put the $250.00 / month away, you will do yourself a great deal!
    Good luck!

  • mister_galager Said on April 20th, 2010 at 12:53 am:

    Absolutely.

    Congratulations on wanting to start saving at a young age.

    Do a internet search on “Roth IRA” and read up on them.

    A good company to get started with is Vanguard. http://vanguard.com/VGApp/hnw/CorporatePortal

    A good fund to invest in is the Target retirement funds. These funds select the investment for you and is more aggressive early but automatically changes to more conservative as you near retirement.

    Here’s a link to Vanguard Target fund assuming you would retire on or about the year 2050…https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0699&FundIntExt=INT

    Good luck.

  • Meg Said on April 20th, 2010 at 1:13 am:

    Yes, that is a great idea!! I am the same age and looking into the same thing.

    I would really suggest reading the book “The Money Book for the Young, Fabulous, and Broke” by Suze Orman. I am reading it right now and it goes into details about Roth IRA’s. It just gives great tips overall about saving your money, I have a decent salary and don’t have to worry about any debt right now…..but I have found this book to be really helpful. The book shows how much you can save if you put a certain amount away each month…its amazing how much you can have by retirement.

    With the 401K, you are not taxed until you take the money out at retirement….which means the amount you actually get is going to be a lot less due to all the taxes you have to pay.

    However, with the Roth IRA….the money is already taxed. So say by retirment you have saved $350,000….you are getting all that.

  • sporregar Said on April 20th, 2010 at 1:22 am:

    You can do a ROTH and a Traditional at the same time. It might be better for you to have both taxable and non-taxable income available at retirement to optimize your tax situation.

    Look for no-load funds with minimum fees for the year. Some places make you have $3000 to even buy in so you might have to save up a bit first.

    Vanguard, Fidelity and Principle are good places to go.

  • runnershigh1754 Said on April 20th, 2010 at 1:50 am:

    $250 a month invested at 12% interest for 38 years will equal 2.3 million. All of it yours. By the way $250 a month for 38 years would mean that you only contribute $114,000. The rest of that 2.3 million (2.19 million) is interest payments made to you. That is what they call making your money work for you. Hope you enjoy your retirement.

  • Charlie T Said on April 20th, 2010 at 2:32 am:

    Let me just say you are a very smart girl for looking into it. Yes, Roth is a great way for you to save for retirement. Go to Fidelity’s web site has a very simple little program that you enter your age, income, etc and it compares traditional and roth IRAs for you.

    I’m hooked on saving for retirement. I save 800(not counting match) a month to a 401k tax free. Another 600 in company stock (I know it’s risky but I’m young enough to recover from an Enron) Now i’m opening up a Roth will be maxing that out. I started at 29 and aready doing quite well. Every time I see those numbers I want to just put more in.

    You must read everything you can get your hands on though. Go to major investers site and compare info. Don’t fall for get rich scams. At 22 you can be a bit more risky in your invests too. More stock- yes you could loose more but at the same time you could gain more and over time the market always goes UP!
    My ex-girlfriend had been investing for 10 years into her 401k. When I looked at it she had all her money in basically a savings account fund. She just didn’t know, she didn’t do the research… As a result her money has not done much at all. Anyway, I could talk for hours about retirement money… i’m 34 and plan on being a high school football coach, fisherman, build my retirement home, hiker, sailor, and all the other things I couldn’t make a living on starting at 53.

    See ya in the islands!

    One other thing to put in your mind. You’d rather starve then ever take money out of your retirement funds. NEVER DO IT no matter how bad things seem you will find a way through it and will thank yourself later.

  • docjulius Said on April 20th, 2010 at 3:08 am:

    The Roth is the way to go. Because you put money in now after taxes, you have the benefit of 40+ years for it to grow with compound interest, and then take it out tax free!!!

    As you get raises, increase your contribution until you hit the federally allowed maximum contribution. You will do GREAT as a result and live very, very comfortably in retirement!!!

    Make sure you have a well balanced portfolio. You want high growth mutual funds for at least the next 10 years or so. As you get older, and closer to retirement, you can move money into what are called growth & income funds, and then prior to and during retirement, you will move into more income oriented funds. As you get older and build the balance, you should consider talking to an independent financial planner.

    Good job!

  • bob Said on February 17th, 2011 at 3:51 am:

    Have you also considered a traditional IRA?

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