Agustina Stimmel: You are young and your future will be shaped by your actions in the present.Say this:"Every present action is the future I create."Right now, you are in a great position to affect your financial future positively, with the right actions that comes from the wisdom and experience of Investors who know about money, investing, and real estate.The author's name is Robert Kiyosaki.The first book to read is "Rich Dad Poor Dad".His company also publishes other books that contains this wisdom about money; that expands it and goes into further detail.Below are the links to his website.I suggest you study his materials carefully....Show more
Florencia Manolakis: You are a smart person to start at 20.Put as much as you can into a Roth IRA. That means that you have already paid income tax on the monies you put into it. This differs from a traditional IRA which allows you to deduct from your income the amount you put in, thereby reducing the amount of taxes yo! u pay.A Roth is better because you will owe NO taxes when you withdraw it in 45 years.My understanding is that the most you can put into a Roth is 4,000/year. I also believe that you have to have at least 4,000 in income in order to put 4,000 into an IRA. If that's the case, it would be far better for your parents to fund your Roth IRA than to pay for your schooling.I will leave the actual investment strategies (stocks vs. mutual funds vs. indices, small cap vs. large cap) for another discussion.Good luck!...Show more
Long Woltjer: You should do a Roth IRA with as much as you can afford per month and I would recommend in mutual funds. Just call Smith Barney or any other similiar company, get a guy, and start. The Roth IRA is tax free when you take it out when you're geezin so it's the best deal around. If the company you work for offers matching funds in some form of 401 K then you should probably split it up and do half with that and half Roth IRA, because you can'! t beat free money with anything. If you start at 20 you should! easily have 1 million, you will probably end up with 3 million....Show more
Kim Gerbino: Good for you for planning ahead. By starting at such an early age, you may be able to retire earlier.I would suggest something safe, yet out of the box. See below.
Mildred Pombo: If you can currently afford to contribute to a Roth IRA, that would be an excellent place to begin retirement savings. There are many good points that have already been made by some of the other individuals who have answered, so I will simply add on a few pieces of information that may be helpful in your decision.In terms of developing tax free dollars in the future, the Roth IRA is probably the simplest way to go if you can contribute. One of the respondents above mentioned that your income with a graduate degree will be higher. That fact makes it seem money in the future would be plentiful, which it may. The point that is not realized in this situation is that as your income increases your ! ability to contribute to a Roth will be cut off. Currently the income limit for contributing to a Roth for a single individual fazes out around $90k/yr and around $160k/yr for a married couple. To have options in the future that will essentially affect your tax bracket in retirement contributing to a Roth before your income is substantial may be a pretty good move. How would a Roth IRA affect your taxable income in retirement? Say hypothetically you would like to live off of $100k in retirement. Scenario A: If you pull that entire $100k from a plan such as a traditional IRA or a 401k, you would be paying about 30% in taxes (in today’s tax rate which is at a historical low) leaving you with $70k to live off of. Scenario B: If you pull $50k out of the 401k or traditional you would actually lower your tax bracket because your taxable income would only be $50k. With a taxable income of only $50k, your tax rate would be 20% leaving you with $40k to pocket. If you pul! l the other $50k out of a Roth you pay nothing in taxes. $40k + $50k =! $90k. Scenario A: $70K Scenario B: $90KJust by saving in different tax environments now, you would potentially increase your income by $20k/yr. Worst case scenario: You graduate with a masters and hate the thought of having student loans or just need extra money for that matter. You can actually access any of the principle that you had invested inside of your Roth without tax or penalty. I definitely do not recommend doing this, however it is an option. If you plan to be as successful as most college undergrads and you can afford it, contribute to a Roth before your income prohibits you from it. Best of luck...Show more
Francis Stickle: Read a couple of good (but simple) personal finance books. I recommend The Automatic Millionaire by David Bach; Young, Fabulous, and Broke by Suze Orman, or something similiar. They motivate and excite you to invest, as well as educate you. I opened a Roth IRA at 18 and am so glad I did because now I have a! pretty good retirement kitty already at age 23. Just makes me feel like I'm on top of things. But I had free cash to save in college due to scholarships, parents, etc. Obviously you need to have some cash on hand too. I wouldn't worry about your student loans yet because you won't have to start paying your loans for years--until you have graduated grad school and are employed full time.My two primary suggestions:1. Make sure your savings is in a good money market fund or high yield savings account earning at least 5% interest. If it's not, put the money in the Vanguard Prime Money Market fund. It is earning 5.22% as of May 2007. 2. I would also make it a point to max out a Roth IRA this year ($4,000). Open one at Vanguard or Fidelity (great funds, low fees) and set it up to transfer $363 each month from your savings account to your IRA. If you start in June you will have your account maxed by April 2008 (the deadline for 2007 contributions). That way you gradua! lly build an IRA , and in 12 months you'll still have over $3,500 in sa! vings. The beauty of an IRA is that it's flexible. It's THE best way to save for retirement, but you can take your contributions back out at any time penalty and tax free. Big advantage over a 401k or Traditional IRA. You can also take out the earnings on those contributions (gains and dividends) for your first home, to pay for school, if you get disabled, etc....Show more
Myron Leftwich: You need to worry about paying for college before you save for retirement. Use the $7500 to help pay for school. The less student loan debt you have the better. And you need to examine your income potential with a bachelors compared to a masters. Is the difference in potential income big enough to justify the amount you are going to spend on graduate school? Even if you dont start saving for retirement till age 25 you will still be in great shape when you retire.
Solomon Belback: You only have about 45 more years to work, Just think you may actually earn money during tha! t time. What a novel idea.
Idell Dufort: You shouldn't really look into retirement until your student loans are paid off. That $7,500 could be used towards paying off your current student loan interest and balance (unless they're federal loans with government paid interest); if not, you'll probably end up using it covering school expenses.
Jesse Pirieda: You are really smart to be thinking about retirement at such a young age. You can put money into an IRA as long as it is earned income. This means it has to come from employment (even if you transfer the money from savings to an IRA, you have to have earned at least that much money during the year). Regardless of student debt, you should start maxing out a Roth IRA (Roth, not regular, because of your young age) as soon as you have earned income. Your student loan debt will be at a low interest rate, and you'll be able to repay it over many years; so don't let that stop you from beginning to fund your Roth I! RA.See the link below and look at the section called, "Why it's importa! nt to get started early."I have my Roth IRA at Vanguard, and I've been very happy with them. You can research their funds on their site (and see historic returns), and once you have your account there, you can move money between funds if you so desire. I would advise you to start with an index mutual fund (Total Stock Market fund or S&P 500 fund).Good luck!!...Show more
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