I read in Maxim that you can get one and your money will collect interest. Is this true? how does it all work? I am an 18 year old college sophomore and i am looking for a good way too save money for retirement, children's education, etc.
2007-02-18 06:49:16 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
Deogee has mixed up ROTH IRA with 529 college savings plans. A ROTH IRA for retirement as others have pointed out, is a way to invest in bank accounts, money markets, CD's, bonds, (which pay interest that is then reinvested, you can't collect until 59 1/2 or else you pay penalties [with certain exceptions]) or stock mutual funds, stocks, Income trusts (which pay dividends which is then reinvested, same as interest). To start one, you must have earned income, a job with a salary where you get a W-2 at the end of the year. If you have the required earned income, a ROTH IRA is a great way to invest for retirement. Don't put all your investment in one. Save some elsewhere for the car, house purchases way before you are ready to retire.
2007-02-18 07:28:21 · answer #1 · answered by gosh137 6 · 0⤊ 1⤋
Actually it's an Individual Retirement Account where taxes are payed before hand, so the interest is tax-free.
Money taken out of the account before 59 and 6 months is penalized except for educational payments (and a couple other things like the original money you put in).
A 529 Plan is a College saving specific account, same with a Coverdell. A 529 is probably the best for your situation.
Here are all the bonuses and requirements:
http://en.wikipedia.org/wiki/529_plan
2007-02-18 15:01:00 · answer #2 · answered by zander1331 3 · 1⤊ 1⤋
Roth IRA is a college plan for your children. You put 5hundred or more in it until the child turns 18 for college or they cant get it until there30 and you do not have to pay interest on this money.
2007-02-18 14:57:51 · answer #3 · answered by deogee 3 · 0⤊ 4⤋
Strictly retirement fund -- and a great deal.
You pay taxes when you put money in, but no taxes when withdrawn
that includes NO taxes on earned interest, you being 18 ----- that
can be one hulluva lot of cash when you retire-- tax free !!!!!!
2007-02-18 15:06:21 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Zander isn't quite correct about money taken out before age 59 1/2 being penalized. You CAN take out your PRINCIPAL at any time for any reason without penalty. You just can't take out EARNINGS before 59 1/2 without penalty.
2007-02-18 16:19:36 · answer #5 · answered by LongArm 3 · 0⤊ 1⤋