Questions about ROTH!!! for college student!?

Question

How much money can I put in the IRA ROTH? I am working part time as an intern, so is it a good time to start putting $ in it or there is really no point until I start full time? What is the yield? Can someone tell me the advantages and disadvantage please. I cannot take it before 65? PLease help thanks! I want to start thinking about the future!!! 10 Points for best answer!

Answer 1

A Roth IRA is a great idea for you, since you are just starting out.  The maximum is $5,000 this year, and you must have earned income to contribute.  For example, if you earn $3,000 this year, you can only contribute up to $3,000.

I'd recommend opening an account at https://personal.vanguard.com/us/home and invest in the Star Fund.  It has a low ($1,000) minimum investment and is diversified; a great fund for beginning investors.  Plus, Vanguard has rock-bottom fees.  FYI, The Star Fund is down so far this year, but has earned 5% over 3 years and 8% over 5 years.

The main advantage of the Roth is that you use after-tax money now (while you are in a super-low tax bracket) and will never be taxed in this money again!  So when you are a rich retiree (at age 59.5), all the money you contributed PLUS it's earnings are completely tax-free!  Also, you can take out your contributions without penalty (although I wouldn't recommend that).

Answer 2

You are limited by the smallest amount, the amount you put in, your earned income or $5000.

The ROTH "orders" withdrawals, so if you need to take the money out later, you can. First you take out your after-tax contributions, so if have put in $5000 and withdraw $2000, it's NOT taxed.  If you have put in $5000 and it grew to $6000 and you took out $6000, then you'd be taxed and penalized on the $1000 of earnings.

Go for it.

Answer 3

I think ErinK gave you most of what you need to know...but I'll just add a couple of things:

If you can find Investors' Business Daily where you are at, it touches on good funds in one section... the " value funds" for long- term investing...and the " hot" sector funds ( which change in the span of a couple of months or so )

...and being educated in the area of " investing," whether cautious or going all out early, is not just for dweebs or financial geeks.... it is learning to take care of yourself ( maybe a spouse and children...down the road ).Something you can really be proud of yourself for in years to come..." thinking about the future"... the time to do it is NOW.

... and lastly, if you can't afford the $ 5000., you can open a ROTH with as little as $ 600. ( I believe)... and add when you can. Fidelity, and others, even make purchases in an IRA much easier ( lower) than for other accounts.

Answer 4

This year you can put in $ 5000.

Now is as good a time as any to start...get one opened up...with an " investment company" ( Fidelity, Vanguard, Schwab ) NOT  at the bank ( CD)

Your " yield" will depend on your choice of investments...DON'T let that panic you... to start with a simple mutual fund would be your choice..  

The main advantage is: your withdrawals ( after age 59 1/2...not 65 ) will be free from income tax...which means that all the gains that your fund or funds make over the years is YOURS...free and clear

Once your ROTH account is opened...you can add to it up to the max every year...or you can totally ignore it... it will just keep making money for you as the years go by...

( IF...IF...If you CAN add to it every year..( hopefully the " max"...which will go up to $ 6000. next year )...and if you can make around 10% on your investments ( just a little above average)...you can EASILY amass over a million before you are 59 1/2.... and a simple jump up to 13% or so would get you close to 2 mil.... Sooooo get it started...and in your very little free time try to read a little about "investing'... getting into the best funds, etc. ( Some funds in the last five years have averaged over 35%...now something like that would really kick off your nest-egg....it will be harder for a few years, markets change, etc...but given the lonnnnnggg time period you have to work with you can EASILY do very well for yourself.)

Good luck.