In my early twenties and I am finishing up school and only work a part time job. I have like a year left and am wondering if I should open an IRA now? I probably shouldn't try to invest any money because I don't have a lot and I want to keep my available funds liquid because of possible bills. Would an online savings account with a high apy be the best thing?
2007-08-09 07:33:34 · 4 answers · asked by Anthony S 2 in Business & Finance ➔ Investing
Your question makes no sense. What you are asking is, should I have some lemonade or do I want my drink (whether it's lemonade, ice tea, or Diet Coke) in a glass? Investments (stocks, bonds, mutual funds) are like drinks; they are different and can be poured in all kinds of containers (or accounts). IRA (Individual Retirement Account) is one such container (actually, there are several different types of IRA). The good thing about an IRA is that investments you hold in it (stocks, bonds, mutual funds, whatever; it's even possible to hold real estate in an IRA) are taxed less heavily or not at all (details depend on the kind of IRA you have). Additionally, there are annual caps on IRA contributions.
You should go see a financial planner; he or she will explain it to you in much more detail.
2007-08-09 07:54:05 · answer #1 · answered by NC 7 · 1⤊ 0⤋
The answer is both. You should keep a small amount of money, enough for 3-6 months of living expenses in a fluid account for emergencies (if you get laid off or in an accident). Any savings fund is fine, but a money market mutual fund with any reputable investment company (like Fidelity or Vanguard) or discount broker (like Charles Schwab) is generally thought to be the best place for this nest egg. Keep in mind that this is different from a money market savings account at your local bank, which offers a similar product with a much lower rate of return.
As soon as you have a few months' worth of expenses squirreled away, start thinking about an IRA. The younger you start on your retirement, the better - you'll have to put in less money over a shorter amount of time to achieve the same retirement amount than if you start later. Even if you just start with a $1000-2000 dollars and put in a few percent of your paycheck every month, it will make a big difference.
2007-08-09 10:00:41 · answer #2 · answered by teresathegreat 7 · 0⤊ 0⤋
How about if you could have an IRA and a liquid emergency fund?
You can, it's called the Roth IRA.
The Roth IRA lets you pull out your CONTRIBUTIONS at any time, tax free. However, if you pull out any GAINS (anything more than you put in), you will be slammed by the tax man.
So, you could invest some money in CDs, Money Markets, or Bonds within a Roth IRA. If you need to draw out some money, you can. If it turns out that you don't have to, you have a headstart on retirement cash.
-->Adam
2007-08-09 07:39:26 · answer #3 · answered by great_and_mighty_adam_levine 4 · 0⤊ 0⤋
The key to success in finances is pay yourself first. Pay yourself automatically (auto-debit)a percentage every month that is for the purpose of investing. You will be handsomely rewarded for starting this habit earlier than later. The power of time & compounding interest is something you should research & be aware of.
The IRA is a great way to get started & you don't need much to begin.
2007-08-09 07:50:56 · answer #4 · answered by ellissanjose 2 · 0⤊ 0⤋