I am 23 and I am still at a job which does not offer any 401k type of stuff. I am still in college and I am keeping this job because it is extremely flexible with school. However, I would like to start stashing something so I can build towards something. Should I just put it in a normal savings account or is there something out there that would be a better option. Anyone have any quick advice?
how long until you graduate/anticipate getting a job that does offer retirement plans? as for now, you could do an IRA or a roth ira. a more short term option could be a CD or a T bill... although, with interest rates sucking at the moment, cash is king.
whatever you do, just don't touch your savings, like any of it it can be little as $10 or $100 a paycheck/month, as long as your touch/spend it, you'll see it grow rapidly I personally stash a certain amount every paycheck and put a percentage into my 401k. Been doing it for 4 years with my 401k and my personal saving, probably around 2-3 years since I paid off my debt and I've been happy with my progress.
2 and half years or so. I have been reading up on iras and I see a traditional Ira and a Roth Ira. I cannot seem to find in what aspects a Roth is better than a traditional way.
401K is a good enough idea if you have the fiscal discipline and are debt-free enough to not need the cash for a while. Otherwise, thanks to the underrated miracle of online banking, if you're with a major bank you should have access to some kind of reasonably-priced online trading account services. For some reason, all my undergad finance courses said a balanced investment portfolio had 60% stocks, 30% bonds and 10% cash. So put 60% of your excess cash in a market-index based mutual fund like Vanguard 500 (VFINX), Vanguard Total Stock Market (VTSMX) or Fidelity Spartan Fund (FSTMX). I don't know how to directly invest in bonds low cost or broker-free, all I do is look at Bond ETFs.
In a nutshell: Roth IRA - can withdraw principle amount at any time with no penalties, only up to 5000.00 a year can be invested, must make under 100k. Traditional IRA - no limits on input, penalties on withdraw - similar to 401k minus the matching. Obviously there's alot more to it than that but that's my general understanding of it. Someone please correct me if I'm wrong.
I got an IRA when I was 22. I'm a very active investor who watches the market daily but I see people who just put their money in an index fund and then leave it alone. But bottom line, interest rates are so low that putting it in savings accounts or CDs just wont give you any return. The downside to an IRA is withdrawal limits but then again the point of savings is to save and I like the discipline of putting money away and not being able to take it out.
You are wrong about Roth IRA's. There are penalties on withdrawals prior to age 59 1/2. Also, depending on your age, you can invest more than $5000 in 2010. You are wrong about traditional IRAs as there are contribution limits there as well. You are wrong in your spelling of "alot".
He asked to be corrected if he was wrong. I don't get upset over it. i am just surprised as to how many people do not know that there is no such word as "alot".
If I were your age - I'd start an emergency savings account before a retirement account. Get 3-6 months of living expenses in a money market account that you can withdraw from without penalty when you need it. This is in case you need lots amounts of cash quickly (car problems, medical, etc..) Money Markets tend to give a better return than a savings account & you can pull money out 2-3 times a month without penalty. Of course you should only pull cash from it if you have too. We've pulled from ours about 3-4 times over the last 4 years. If you do pull money out for an emergency, try to replace it as quickly as possible. After you have the emergency fund, then I'd open a Roth IRA and invest for retirement. Check the history of the funds you invest in - make sure they have a good track record over the last 5-10 years or longer. Keep in mind that you're investing for the LONG HAUL - not the short gain. People that constantly move money in and out of investments tend to not do as well as those who leave there money in and wait out the market dips.
so if i wanted to put about 10k in something for a year and get it out with zero risk. there is nothing other then a cd? im looking at wellsfargo at the moment (where i have my checking) and there apr% is .40 it seems almost pointless and there is really no reason to bother. i thought cd rates were at least 4-5% i guess i was wrong.
why? why are you surprised that you are so much smarter than so many people?? you shouldn't be surprised man, you should be proud as hell! pat yourself on the back! you did it!!!!
At this point in your life, a Roth is probably the way to go. A Roth allows you to take your earnings out beyond 59.5 completely tax free. You can also withdraw the principal early penalty free. The basic principle is invest in a Roth if you expect to have a higher tax rate in retirement, and invest in a Traditional if you expect to have a lower tax rate.
