Opening a roth IRA. What do I need to know?

Question

I really wish they would have taught us this in high school. Fortunetly we learned things like the quadratic equation... which I use all the time. *sigh* I'm 22 and have two kids. My fiance and I want to get our foot in the door know and start banking money in an IRA since I've recently learned that you can contribute a set amount each year, and after the year ends, that chance is lost. Since we're doing well financially, we want to take advantage of putting money in this year.

Unfortunetly we don't know where to start and I've spent hours researching online but all it leads to is a massive headache. Is there a site that really breaks it down in easy to understand termenology? Right now we've been eyeing Vanguard since I keep a lot of information on them. If we open an IRA there and put $5K in, do we have to invest it or can we leave it like a bank till we decide what we want to do with it? Can we get them to choose stocks for us since we don't know how, or where, to invest.

Answer 1

What's an IRA? An IRA is a tax qualified plan. This means that you are free to put your money in all kinds of investments. It could be anyting from a saving account to your own business.

To answer your question in lame terms: all the mutual fund companies are good companies. Choossing an investment is easier than what you think. Choose a mutual fund that has averaged 10-12% per year for the last 20+ years. You can look at their perfornace on yahoo finances or google finances. Look at this concept:

$1/mo for 20 yrs @12%=$1 000

$300/mo for 20 yrs @ 12% is $300 000

Set an automatic draft from your bank account for the amount that you want to set aside every month.

I have a wealth of knolege in my blog.

Good Luck

Answer 2

now is not a good time since a lot of banks are about to fold and 8% of FDIC insurance got used up yesterday on just one major lender bank that failed ,rite now  the safest place for your money would be hidden where only u can find it.

But yes roth IRA is a good plan they just tax before hand and  it grows taxfree untill retirement age when u will be in much lower tax bracket,  hope this helps.

Answer 3

Vanguard and T. Rowe Price are two of the best mutual fund companies.  But first educate yourselves:  "Investing For Dummies" is an excellent starter book.