16 yrs old Go for the totally FREE IRA account at my local bank?

Question

Hi,

I have a stable job and Im 16 I was planning to get a $1000 market account and some $500 CDs. I am a big SAVER I NEVER have to spend my money cause I worked hard for it.

My parents wont let me invest online nor would they let me open accounts at other institutions. Now im stuck at my local bank for now.

I know, I read and took a little dig in finding a little info about IRAs. Its insured by the FDIC up to $250,000 and it can only be open when one is 59 years old and its TAX FREE. Never pay taxs when you open and there is nifty fees to open when one reaches into their IRA prematurely.

1) So, here this brings to my question should I get a totally free IRA account that has no minimum balance at my bank?

2) Why should I get it I might die before I reach age 59?

3) Whats the whole purpose of invidual retirement accounts doesn't it destroy the purpose of 401K's, pensions, social security?

5) How does traditional IRAs and Roth IRAs differ?

Answer 1

If you are serious about investing now, you really should be putting that money into the stock market via a mutual fund or index fund (through the IRA if you are so inclined) since you are young and in for the long haul you can afford to take bigger risks.

You can still open 401Ks and such later on, they are not exclusive.

Contributions to a roth IRA are not-tax deductable, but will be tax free when you take it out.  Trad IRA's are tax-deferred, meaining you deduct it now but pay it later.  Again, you are young and so the deductions won't help you know so go for Roth.

Don't forget mid-range savings in a regular CD, mutual fund or whatever is a good idea too.  Good luck.

Answer 2

OK first thing first, a traditional IRA is funded by money out of your paycheck PRETAX, a Roth IRA is funded by monies you have after taxes.  now with your IRA you can let it sit in the bank and compound interest monthly. or you can take the money under the IRA account and buy a money market.  You can still get a 401k. 401K's usually have some kind of company match usually .50cents per dollar on the first 6% ddeposited.   when you retiree and you withdraw your money if its in a Roth IRA you only pay taxes on the money you made, not on what you invested because you already payed taxes on those monies.  now if it is on a traditional IRA you will pay taxes on all of the money taken out.