Question
I am currently 21 years old and entering my senior year of college. With my career on the horizon I would like to set up retirement funds asap. I know there are several out there (Rollover IRA, Roth IRA, Traditional IRA). I really don't know what any of these mean or what type of accounts are best for someone like me.
I am currently 21 years old and entering my senior year of college. With my career on the horizon I would like to set up retirement funds asap. I know there are several out there (Rollover IRA, Roth IRA, Traditional IRA). I really don't know what any of these mean or what type of accounts are best for someone like me.
Answer
lets start at the begaining. An IRA is a form of retirement account. it is a form of investing, with that said there is no Guarantee rate of return but for calculation purposes figure 8% to be conservative. there are only two types, a roth and a traditional. the rollover would be from a 401K which i'm guessing you don't have since you said career is on the horizon but if you do and want to roll it over it would be in to one of the other types. It being a retirement account there can be penalties for removing the money prior to the age of retirement with a few exceptions (first house and some others). The first is the standard IRA, which you put money into pre-tax. This is a great savings on your tax return because you are taking down your taxable income. In you are not in a high tax bracket it may not make a huge difference for you. Also the money that is in you IRA will be taxed when it is taken out during your retirement. The other type of IRA is the Roth IRA, which is all post-tax money so there is no effect on your tax return. In the Roth IRA the money you contribute and it's earning would not be taxed when you do with draw it during retirement. this is what i did when i set min up. Now for places to get this all rolling, you can try Fidelity Smith Barney or Vanguard. I used Vanguard to set up one for myself and sister but I know the initial set up investment is a minimum of 3K but that have super low expense rates. Fidelity has a very easy to navigate site and lots of information so it would be a good resource. Smith Barney is also easy to use and has a wide variety of funds to pick from. Lastly there is a limit to the amount you can add to your IRA (either type) and I think it is 5K this year so try to fund it as much as you can. It sounds like you are off to a great start. Hope I helped and Good Luck!!
lets start at the begaining. An IRA is a form of retirement account. it is a form of investing, with that said there is no Guarantee rate of return but for calculation purposes figure 8% to be conservative. there are only two types, a roth and a traditional. the rollover would be from a 401K which i'm guessing you don't have since you said career is on the horizon but if you do and want to roll it over it would be in to one of the other types. It being a retirement account there can be penalties for removing the money prior to the age of retirement with a few exceptions (first house and some others). The first is the standard IRA, which you put money into pre-tax. This is a great savings on your tax return because you are taking down your taxable income. In you are not in a high tax bracket it may not make a huge difference for you. Also the money that is in you IRA will be taxed when it is taken out during your retirement. The other type of IRA is the Roth IRA, which is all post-tax money so there is no effect on your tax return. In the Roth IRA the money you contribute and it's earning would not be taxed when you do with draw it during retirement. this is what i did when i set min up. Now for places to get this all rolling, you can try Fidelity Smith Barney or Vanguard. I used Vanguard to set up one for myself and sister but I know the initial set up investment is a minimum of 3K but that have super low expense rates. Fidelity has a very easy to navigate site and lots of information so it would be a good resource. Smith Barney is also easy to use and has a wide variety of funds to pick from. Lastly there is a limit to the amount you can add to your IRA (either type) and I think it is 5K this year so try to fund it as much as you can. It sounds like you are off to a great start. Hope I helped and Good Luck!!
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