Retirement Accounts-help me Please!!!

[thetieguy]

Hi, I was watching tv this weekend and heard someone say if you put $100 a month into a retirement account starting at 25, when you will retire, you will have $1,000,000. I have hear dthis many other times as well. I am looking to start an account for retirement, but I do not know where to start. I don't have a lot of money to put in at first and would only be able to put in $100 or so each month. I know it is a small amount, but I figure something is better than nothing. Where do I start? Is this an IRA account they are talking about? I don't plan on taking any money out and don't want something with a lot of fees to it. I also don't want to pay a lot for only starting it with a small amount. I am sure many of you here have these accounts and are happy with them. I appreciate all the help you can give me. Thaks guys!

 

[lee_44106]

Thanks to the magic of interest compounding, your $1200 a year (or $100 a month) will become a sizable amount when you retire. I'm not sure about the $1 million, I think it's more along the line of $600K though. Nonetheless, it's not something to sneeze at.

I can't help you with the specifics of investing, but the important thing is to realize at a young age that you CANNOT rely on the government to sustain you in old age. DO NOT count on social security to be there.

 

[lithium180]

What you saw referred to on TV was probably an IRA account.

The NYTimes recently printed a short article about types of IRAs


The IRA is not a fixed income investment, meaning that you can't just put the money in without building some knowledge about investment vehicles and how to manage them. You want your account to keep growing healthily over the years. (


(Although I think that a lot of people probably keep their accounts on auto pilot by using index funds.)

 

[thetieguy]

Lee, i agree with you 100%. While I am slightly older than 25, I feel like I better get a move on it before it is too late. I might be wrong, but I thought I heard that soon we will be paying more out in social security than we are taking in.

 

[kwilkinson]

I don't know anything about IRA. I know that if your job offers 401(k) as a benefit, this would be a great way to set up a retirement account. The money would come out of your paycheck pre-tax, and most employers contribute a match or a percentage of what your contributions are as well. My work gives 50% of all contributions up to the first $1500. It's not a lot, but it's an automatic 50% ROI, so not bad.

Here's a 401(k) calculator website. http://www.mycalculators.com/ca/401kcalcm.html

If you're young, then even better. I'm 21, and contribute a very small amount of $150/month ($225 after employer contribution) to my 401(k). It doesn't matter that you put in 10k a year or anything. Just start contributing and give your money time to grow.

There are plenty of others guys who can tell you all about IRA and Roth IRA and anything else you might want to know, but that's what I can tell youa bout the 401(k).

 

[thetieguy]

I work in a retail chain and have a small amount of each paycheck go to a profit sharing/401k plan. Some money goes into a company stock plan and the rest goes into other funds that I do not know very much about. I just started thinking about the future a lot now and want to be ready down the road.

 

[yerfdog]

IRA and Roth IRA accounts are just a type of tax-advantaged account - you put the money in it and then invest that money in whatever you want. In a Roth IRA you pay taxes now on the earnings that go into the account, and you pay no taxes later. This is good if you think you'll be in a higher tax bracket when you are old enough to take the money out. In a Traditional IRA you pay no taxes now on the earnings that go into the account, and pay taxes when you take it out. This is good if you think you'll be in a lower tax bracket when you are old enough to take the money out. Here's a good article that explains a bit more: http://www.getrichslowly.org/blog/20...aditional-ira/

 

[thinman]

You are very, very wise to start saving for retirement as early as possible. I started in my very early thirties and wish I'd started earlier. As another poster stated, compounding works magic if you have a long time horizon like 40 years (or even less).

If your company offers a 401(k) plan, I advise contributing as much as possible, especially if your employer matches contributions. If your employer offers a 401(k) plan, the Benefits Office can help you get started on the paperwork.

If your employer doesn't offer a 401(k) plan, I suggest an IRA and probably a Roth IRA. With a Roth, you pay taxes now, but your money grows without taxes and your withdrawals are also tax-free. So you score a big win if you're in a lower tax bracket when you contribute than when you retire. Regardless of whether or not you choose a Roth or a regular IRA, you can contribute as much as $5000 this year.

If you don't want to spend a lot of time monitoring investments, I suggest you learn about mutual funds, choose one, and forget about your investment for about 40 years (OK, not literally). Good books abound and you should also start paying some moderate attention to the financial press. The key is to educate yourself about investing (Mutual fund companies are happy to send you paperwork to set up an IRA, since they'll be getting your money to invest for a loooong time. After you've done some research, just call your favorite company and ask for the application to open an IRA).

 

[briancl]

I started with small contributions at age 23 and more serious contributions about 1 year later, and I wish I'd started earlier. I wish I put away even $25 per paycheck when I was 18. It adds up quickly.