I promised myself that I would finally open a Roth IRA. Where do I get started?
Get Rich Off Your Roth
Congratulations for getting off your keister and starting your Roth IRA. This nifty little account, available to anyone with earned income (money you have earned and paid taxes on), is the golden brick road to a comfortable future. The younger you are when you start your Roth, the more money you will make over time. The bottom line is that a Roth IRA can only earn a ton of money if you sit and let it grow so only use money you can really part with for like, 35 years. If you can’t reach the $4,000 maximum ($5,000 in 2008) contribute whatever you can. It will pay off handsomely.
Keep Your Investing Expenses Low
Once you’ve figured out how much you can save every month you’re ready to open a brokerage account. With any IRA you have to not only put money in the account but invest it as well. This means choosing simple, low-cost investments that will work hard for you and earn lots of money. For investing beginners all you need are three index funds (funds run by computers instead of expensive stock pickers) that track the S&P 500, the Russell 2000, Wilshire 4500 or the Lehman Bond Index. All you need are three to get a “diversified” (safer) portfolio. Your account may even offer you a lower annual fee if you go with electronic statements so you can save some cash and some trees. Just keep pumping money into it and let it make you rich.
Save Consistently
Whether you want to retire on a diamond-studded yacht or a nature reserve you have to save consistently. Believe it or not, people make more money saving consistently than trying to pick the next big stock. Time does the heavy lifting so all you have to do is let your Roth IRA pull money out of your checking account every month and you’re set. The trick is to make sure the money you’re contributing is money you can really part with so that you’re not tapping your Roth money later to pay bills. Save consistently, invest in index funds and you’ll be laughing all the way to your beachfront villa.
Our Ask the Expert for your money questions is Rebecca Schreiber, a Certified Financial Planner with Solid Ground Financial Planning. What questions do you have about handling your hard-earned money? Ask now before you blow another dollar!
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