Benefits of a retirement account?

Question

I know this is a newb question, but I don't know much about retirement.
I am looking into opening up a Roth IRA. Will I have to wait until I'm age 59 1/2 to take my money out? This doesn't really sound like a good deal to me. Is there any other reason why opening up an IRA would be beneficial to me?
Also, what kind of funds should I have in my Roth IRA? Stocks, bonds, index funds, etc?

Answer 1

Where to start ? I can guarantee you that 59 1/2 is NOT as far away as you think it is... even if it's 40 years away...you just have NO idea how quick you will get there. College, Viet-Nam, 3 kids grown, remodelled three different houses/buildings, 36 years working...all gone ( and I don't know where ). So just be ready!
That being said...a ROTH is a great idea..the best!...( I'll throw in a website at the end of this message, for your consideration) ...but here's the main point...that money is going to be invested...you will learn to choose where... and it will make money, and it will grow...and if you keep adding it will grow almost phenomally... and when you need it, it will be yours TAX-FREE... and believe me after forty years of paying taxes on every single thing in your life, you WILL appreciate the gift that TAX-FREE income is !!!
Get one right away...and add to it right after the Apr 15 deadline....watch that money work for a year...and you will have some idea of why it will " be beneficial" to you.
WHERE to put it? You are young, these first few years you can afford to be aggressive... get a jump...
Whichever company you decide to go with will have a few " international" funds..." emerging markets" funds....get in there with most of your money...for three to five years ( at least) they will be verrrry profitable. If you can get returns in the 15% neighborhood, you will be " cooking" ( I own FEMKX, EUROX, FLATX...all above 25% the last few years)
Some idea of what you're working toward:
http://www.finishrich.com/free_resources/lattecalculator.php
See how you can " take care of yourself"...try $2500. per year..at 10%...then 15%...20%... then try $ 3000. or $4000.
Remarkable, huh?
Look, no one can guarantee 15% for forty years, and maybe you won't be able to afford $ 4000. EVERY year... but it can't hurt you to make this little effort right now...and whatever you DO get into a ROTH in these next few years will be waitng for you ( multiplied 20 or 30 times over) when you're 60...

P.S. Those index funds and bonds come into play when you have years of profits to protect. Good luck.

Answer 2

I like Roths. I've had a Roth since the first year, so I've had them over 5 years.

I put my $4000 in today for my 2007 contribution. If I hadn't already maxed out the 15% tax bracket, I would also be rolling some money from an existing IRA to a Roth ("rollover contribution" and each separate rollover has it's own 5 year clock).

The money in the Roth grows tax deferred. If I can wait until I'm 59.5, it's going to all be tax and penalty free. Sounds good to me as it will help counter the taxable income I will still have when I retire.

If I need the money before then, it's gets a little dicey (I won't qualify for any exceptions), but I've had the account so long, taking out a little won't hurt me. That's because there is an order to the withdrawals:

First you get back your regular contributions. These were after-tax dollars so there's no income tax. No penalty either (the real downer is the money can't be put back into the account).

Second, you get back your rollover contributions. Any that are from 5+ years ago are fine. Ones within the last 5 years get hit with a 10% penalty (a legacy of being an IRA).

Third and last, you get back your earnings. These get hit with income tax and the 10% penalty.

Answer 3

Roth IRAs tax you now so you pay no tax on the proceeds between now and the time you turn 59.5. When you get to be that age, you will probably think you did yourself a favor.

Do not invest in Stock Mutual Funds at this time. The market is going sideways. One day it is up, the next day it is down. You will not appreciate that way. Bonds and CDs are the way to go, or buy and sell individual stocks that you pick after you do homework and you get out when the gettin is good.

Safest Mutuals are Bond funds and CDs. They don't get huge returns, but you don't give your money back either.

Answer 4

You really need to take the "long term" approach. If you plan to live beyond 59, putting money away now for that future is a very good idea.
All of the investment advice says that you should invest in stocks if you are young, but I disagree. Charles Schwab offers investment in foreign bonds. I'd diversify out of 100% United states things, and get some New Zealand bonds. Actually, I've done this, and they are doing nicely.

Answer 5

Do it