Investing in a Mutual Fund?

Question

In a few months I will turn 18. I've decided to invest in a mutual fund with Vanguard. I am unsure of opening an account as an Individual or ROTH IRA/ Trad IRA. I really want to save for my retirement in the future, but I am also afraid that I am need the money before I turn 59. Would it be possible if I open an both accounts? What are your ideas and recommendations for this?

Thanks alot, Dat

Answer 1

Congrats on planning at such an early age! You are to be commended for your forthought.

Put the monies into a ROTH. Since it's post tax dollars that funded the Roth, if you need to withdraw some of those funds before then (heaven forbid, since you'll make other income), then you can still do so, albeit with a penalty (you pay taxes on your returns).

That should give you your best leverage while maintaining flexibility.

Hope that helps!

Answer 2

At your age the best option is a Roth IRA. You are most likely not in a particularly high tax bracket, so you aren't giving up much of a possible tax deduction from a traditional IRA. Also, the contributions (but not the earnings) from a Roth IRA can be withdrawn at any time without penalty, so that gives you a little more flexibility than a traditional IRA if you need the money before age 59 1/2.

Answer 3

You are limited to $4000 per year into an IRA. You may split between a Roth and a Traditional but you are limited to the Maximum. I recommend the Roth for you. You can take the money out to buy a house later on. After 5 years you can take out everything you put in with no penalties. (The gains will have to remain). The Roth is a good deal.
Vanguard is an excellent house you have chosen well.

Answer 4

A wise choice would be to decide the amount you wish to save and then split that into two portions. One to go into a Roth IRA account and the other into a regular mutual fund account. The Roth is for your retirement funds. The regular is for your investments that you might very well want to tap into during your travel through time. Unfortunately, Vangard has a minimum investment amount of about $3000 so at your age and I assume with your resourses it will be difficult to do both at once. Since your retirement is still some years into the future but your eventual need for funds might no be so remote, I would recomment starting with an account that you can gain access to first. Then perhaps next year start your Roth. As a previous responder mentioned the Roth is preferable to the tradional because the funds can be withdrawn tax free.

Answer 5

Roth IRA = tax free growth + tax free withdrawal at retirement.
Traditional IRA= tax DEDUCTIBLE + taxed at retirement.

I would go with a Roth IRA because well it's tax free. At your age you probably don't need traditional IRA because you don't have that much assets to deduct from. Assets meaning property tax, capital gains, business tax.. and so on.

You can just hide your money in a Roth IRA and take advantage of the tax free earnings & withdraw it tax free at retirement.

Answer 6

Jimmy, your situation is just like mine...of years ago...congratulations on starting so young.

go for the roth ira and remember that you can put in less during lean times if you wish...up to 4k this year, but put in less if need be....then when you get a good job, go for the 401k company match..

by the time you reach 50 you will retire a millionaire...way to go.

for your roth, go to vanguard or fidelity...both have many selections for the lowest of fees. i like vanguard