is a ROTH IRA the best kind of investing for "retirement"?

Question

i am 24 and self-employed. i want to begin saving for when i am 65, but am unsure if a ROTH IRA is my best option. although i am researching now, for the most part i am still ignorant of the stock market and feel uncomfortable handling my own investments without a broker's help. if i could have $10,000 to invest initially, what are my options other than a ROTH IRA? or, is a ROTH IRA the best balance of security (it WILL grow in 40 years and without taxes!) and low-maintenance (well, little maintenance worries for ME) after all?

Answer 1

The Roth IRA, in my opinion, is the best option for retirement. I do not mean to be critcal of stock brokers in general, but there is the possibility of having a bad broker and that can be worse than making the decisions yourself. There are a couple of options open to you where you can invest without the help of a broker. These options are mutual funds and index funds. If you open your Roth IRA account with Fidelity or T Rowe Price or Vanguard, they all three have a wonderful selection of mutual funds to choose from. They also have no brainer mutual funds where you pick the year you are planning to retire and invest in that fund. The investment strategy of the fund changes to a more conservative approach as you approach retirement. No maintenance worries at all. Not much fun either I might add, but maybe that is not a concern for you.

Answer 2

A ROTH IRA is like a shoebox, and your investments are the shoes. You keep the shoes in the shoebox. The Roth IRA means you won't pay taxes on the increase of money when you take it out in retirement, which is a great deal. You still have to pick the shoes in the shoebox, but you can change the shoes. Does that help? You can learn how to invest on your own. Start with mutual funds, perhaps just an index fund which invests in the whole market. Market goes up, so does your fund. Stock markets tend to appreciate about 11% a year over time, so your investment will double every 6-7 years or so. Also, a Roth IRA lets you take the initial money out if you want to buy a house or something after five years, so it's a great deal. Read some finance magazines like Money or Kiplinger's Finance to learn more, or go to websites like www.fool.com.

Answer 3

A Roth IRA is better than a regular IRA, given your age, because you'll only pay taxes on the small amount you put in, not the large amount you take out when you retire. Since you're self-employed, you can also look into similar plans like Keoghs and SIMPLEs.

However, the Roth IRA is just the legal framework - how you choose to invest the money within that framwork is up to you. You can go with any mix of stocks, mutual funds, bonds, or whatever. Since you're young like me, it's generally recommended that you go with fairly aggressive investments, since you have more time than your parents to both reap the larger rewards and bounce back from any losses.
Remember to diversify - invest in the overall stock market, not individual stocks.

Read "The Automatic Millionaire" by David Bach - a great introductory read to retirement investing, very informative and user-friendly to non-financial types like me.
"The Complete Idiot's Guide to Managing Your Money" is also a great resource.

Answer 4

You're getting a lot of good answers.

I just want to clarify that a Roth IRA is not an investment, it holds your investment until retirement. A traditional IRA is similar except that it is funded with pretax income which means it can grow faster and larger than a Roth IRA.

If you need a current tax write off, you can get that from a traditional IRA, the withdrawals are taxed at retirement. If you don't need a current tax write off, a Roth IRA can give you tax free income at retirement.

Answer 5

Absolutely. Start now and don't skip any years. You can figure you target amount using this handy calc: http://www.easynpv.com

Put it all into the Roth. Half now, rest in 6 months or so(2008).

Answer 6

i believe so