Should I invest in a Roth IRA before I get a long-term job?

Question

I'm 20 years old. I just finished my freshman year of college at an engineering school. From my summer job I have approx. 3000 I could put away retirement.

Should I wait until I have a permanent position after college to see what kind of savings plan my company offers, or is it okay to go ahead and start investing in a Roth IRA?

Answer 1

Start your IRA and contribute the maximum you can.  At your age you have the benefit of really long-term interest rate compounding.  Market returns have been pretty abysmal lately, but think of it like this...at 10% annual returns, you'll double your principle investment every 7 years.  Imagine what you could have if you continue to contribute every year.  To be more realistic, you should probably factor in an 8% average return, not 10%.

Answer 2

Open one NOW... no matter what comes with your new/ permanent job... IT CAN'T HURT.... you can ignore it for the rest of your life...or you can add to it...BUT...IT WILL BE THERE ...making money for you.

Your employer may have a ROTH 401 plan, he may not...you WILL have that ROTH ... and someday it will be TAX-FREE  " mad- money" for you and those that your sharing your life with ..wife? kids? ( they'll look at you and say " Boy! You were pretty smart at 20"....I hope they don't add " ..what happened? "

Answer 3

You have nothing to lose and everything to gain.

Roth's allow you to withdraw what ever principal you deposit anytime, penalty free.  Per Wikipedia:

Direct contributions to a Roth IRA (i.e., not including rollovers) may be withdrawn at any time with no tax or penalty, since they have already been taxed.

Gains and conversions are treated differently, but if something should happen where you need your money, you can get to it.

Answer 4

If you can afford it, the sooner you start the better.