Question about IRA's. First time investor.?

Question

My fiancee is still a temp where she works so we cant invest in a 401k but want to prepare for our future. An IRA seems our best choice but we are confused on our options. I know there are multiple types of IRAs you can invest in such as the Roth but we have no clue what is best for us.

My fiancee makes about $20,000 a year AFTER taxes and receives a $400 bonus every 3 months. I am disabled and collect SSI for $7,500 a year. The IRA is going to go in her name. We live pretty thrifty and at the end of the month we tend to have $1,000-$1,300 left over. She is 23 and I am 25.

The questions are.

1. What type of IRA should we look into?

2. Where should we go? We are thinking her credit union she banks with but are not sure if this is the best place.

3. Is there a limit or disadvantage to investing after a certain point?

4. Anything other then IRAs that can help us plan for our future?

5. I heard the goverment matches a % of your investments with 401ks what about IRAs?

Thanks everyone!

Answer 1

1.  Roth = tax-deffered growth, no tax when you withdraw

     Traditional = tax-deferred growth, tax deduction for the year you make contributions, you pay normal income tax when you withdraw

2. You may not be able to buy investments through your credit union, but if you can, that's a good way to go.

3.  I think the current limit is $5,000 per year per person to contribute to the IRA.  The only disadvantage is you can't spend the money you save for retirement.

4.  Read a few books about investing, Cramer's "Stay Mad for Life", Idiot's Guide to Investing, and try to find some articles about Warren Buffett's investing strategy online.  Investopedia.com is a great resource

5.  Companies match 401ks, not the government.  Government retirement plans are 403b's I think.

Answer 2

I'll try to answer what i do know here.

1. there are two types of IRA, a Roth and a Regular IRA. the Regular IRA is pre tax money and would take down your taxable income when you file your taxes.  but the money then grows in the IRA and would be taxed when you take it out for Retirement. the Roth is post tax money that grows tax free and is not taxed when you take it out.

2. I would look at going somewhere a little bigger then a credit union for the IRA. consider Fidelity, Smith Barney or Vanguard. i have found Fidelity to be very user friendly for investing. I started my IRA at Vanguard and thought very well of them also.

3. there is a limit to how much you can invest each year, i think the cut off this year is 4 or 5K per person.

4. you do general investing.

5. it is not the government that matches your 401K, the company you work for will match a %. the goverment benifits to the IRA are what i have listed about in #1.  

You are right that the IRA would have to be in her name becuase the income for it much be earned income and i do not think SSI would qualify. Also looking at the comapnies' websites that i listed would give you more information. Good Luck.