Tuesday, October 25, 2016

Retirement planning part 1

I don't care who you are, how old you are, or how little  money you have. You NEED to get a ROTH IRA going if you have a job. And the younger you start the better it is for you. . If you have a job (16 year olds with a summer job need to do this), you can put money in. It comes out after taxes so it doesn't have to be payroll deduction. You can open one just about anywhere--banks have them; investment firms have them.

Why is a Roth so cool?  Well, all the interest you earn is completely tax free. That means if you invest $1000 at 16, and if you never put any more in, if it averages a 7% yield (not likely right now, but we can dream). Anyway, based on that 7%  return, in just over 10 years, your investment has doubled into $2000. In 10 more years, it's turned to $4000. At 66, that $1000 investment at 16 has tuened into $32,000. And what's even cooler?  There's no tax on that money. None. That original $1000 was already taxed and the entire $31,000 of profit is tax free.

Isn't a pretax IRA better? Well, let's consider the same $1000 of investment. Sure it came out pretax, so at 16, with a summer job, you only paid $980 of post tax dollars. At 66, that $1000 investment is also worth $32,000. But now when you start to withdraw it, you are taxed at your tax rate at that point, which even at a very conservative 25% rate, your 32,000 in your IRA only nets you $24,000. The missing $8,000 is taxes. Sorry.

Ok, so which Roth is right for me? The real secret is looking at fees and commissions. Some are made for the larger investor and others for the smaller investor. Ask questions. Research. Find out what risks are involved in the investment. Find a place you feel comfortable. If you feel they rest you as irrelevant Bacardi  you don't have a huge investment sum, keep looking. You need a place to take your investments who will help you grow from nothing to a tidy nest egg.

Also take note of the other perks of Roth: First time home purchase and educational expenses can be withdrawn without penalty. Otherwise you are 59 1/2 before you are eligible to withdraw.

And that's part one of retirement thoughts. Many more installments will follow. I don't want to overwhelm you yet.

4 comments:

  1. Replies
    1. Thank you. I've put down the keyboard but really need to get back to this. As I stated, I'm not a money professional at all, but I've taught myself to be savvy and wanted to share my knowledge.

      Delete
  2. The writer has written this blog in the most artistic way. Splendid!
    Changelly echange

    ReplyDelete
  3. Unfortunately finance is not typically addressed until a company is in crisis. Plan ahead with an effective business plan and loan package.online payday loans delaware

    ReplyDelete