What do you do with money in your 20s?

[Alex+R 0]

Hm Ok I am reading about the Roth IRA and also about investing in mutual funds. Can you do both? Is that even advantageous? I'm doing some research. But it's so full of stuff that I've never even thought about before that I'm getting a little buried in terminology. I might have to go to one of those financial advisors Jenn mentioned...

The Roth is highly recommended. And a regular mutual fund is a good place to put extra savings.

Right now you can contribute $4000 annually to a Roth. A spouse can have one too ($4000 also).

"You can establish a Roth IRA by making a regular contribution to a Roth IRA or by converting a traditional IRA to a Roth IRA.

You may be eligible to make a regular contribution to a Roth IRA even if you participate in a retirement plan maintained by your employer. These contributions can be as much as $4,000 for 2006 ($5,000 if you're 50 or older by the end of the year). There are just two requirements. First, you or your spouse must have compensation or alimony income equal to the amount contributed. And second, your modified adjusted gross income can't exceed certain limits. For the maximum contribution, the limits are $95,000 for single individuals and $150,000 for married individuals filing joint returns. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $110,000 (single) or $160,000 (married filing jointly).

You can convert your regular IRA to a Roth IRA if (a) your modified adjusted gross income is $100,000 or less, and (B) you're single or file jointly with your spouse. You'll have to pay tax in the year of the conversion, but for many people the long-term savings outweigh the conversion tax."

What's the deal with married people who file separately? I can't figure this out in terms of the limitations on the Roth IRA.

[Marc and Olga 0]

Hm Ok I am reading about the Roth IRA and also about investing in mutual funds. Can you do both? Is that even advantageous? I'm doing some research. But it's so full of stuff that I've never even thought about before that I'm getting a little buried in terminology. I might have to go to one of those financial advisors Jenn mentioned...

IF you can afford to do both!

Things to keep in mind:

Is this planning for retirement OR a "rainy day" fund?

IRA's have a "early withdrawal" penalty if you take money out before a certain age, mutual funds do not.

I am getting the impression you do not have the option of a 401(k) at work? IF you do ABSOLUTELY invest in it, especially if there is a company match.

Where I work has an awesome 401(k) plan with a 2% company match AND the tribe I work for (I work at a casino!) matches 5% in addition to the 2% match from the casino! Best part is I am 100% vested!

Currently I have my 401(k) and a saving account but after Olga arrives I will be looking into mutual funds for a longer term savings.

Of course these are only my savings type accounts, I have a spending (checking) account as well.

[Alex+R 0]

Hm Ok I am reading about the Roth IRA and also about investing in mutual funds. Can you do both? Is that even advantageous? I'm doing some research. But it's so full of stuff that I've never even thought about before that I'm getting a little buried in terminology. I might have to go to one of those financial advisors Jenn mentioned...

IF you can afford to do both!

Things to keep in mind:

Is this planning for retirement OR a "rainy day" fund?

IRA's have a "early withdrawal" penalty if you take money out before a certain age, mutual funds do not.

I am getting the impression you do not have the option of a 401(k) at work? IF you do ABSOLUTELY invest in it, especially if there is a company match.

Where I work has an awesome 401(k) plan with a 2% company match AND the tribe I work for (I work at a casino!) matches 5% in addition to the 2% match from the casino! Best part is I am 100% vested!

Currently I have my 401(k) and a saving account but after Olga arrives I will be looking into mutual funds for a longer term savings.

Of course these are only my savings type accounts, I have a spending (checking) account as well.

Right now I don't have a 401k option, and since I'll be job-hunting soon, I don't know that I'll get one at my next job and I'm sure I'll be some sort of underling and unless I'm at a big company I doubt I'll get nice benefits.

I'm thinking I need a retirement plan AND a rainy day fund. I'll need to find something else that doesn't severely penalize you (like Roth and 401k) for cashing out early if need be.

[Hilarious Clinton 452]

Hm Ok I am reading about the Roth IRA and also about investing in mutual funds. Can you do both? Is that even advantageous? I'm doing some research. But it's so full of stuff that I've never even thought about before that I'm getting a little buried in terminology. I might have to go to one of those financial advisors Jenn mentioned...

The Roth is highly recommended. And a regular mutual fund is a good place to put extra savings.

Right now you can contribute $4000 annually to a Roth. A spouse can have one too ($4000 also).

"You can establish a Roth IRA by making a regular contribution to a Roth IRA or by converting a traditional IRA to a Roth IRA.

You may be eligible to make a regular contribution to a Roth IRA even if you participate in a retirement plan maintained by your employer. These contributions can be as much as $4,000 for 2006 ($5,000 if you're 50 or older by the end of the year). There are just two requirements. First, you or your spouse must have compensation or alimony income equal to the amount contributed. And second, your modified adjusted gross income can't exceed certain limits. For the maximum contribution, the limits are $95,000 for single individuals and $150,000 for married individuals filing joint returns. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $110,000 (single) or $160,000 (married filing jointly).

You can convert your regular IRA to a Roth IRA if (a) your modified adjusted gross income is $100,000 or less, and (B) you're single or file jointly with your spouse. You'll have to pay tax in the year of the conversion, but for many people the long-term savings outweigh the conversion tax."

What's the deal with married people who file separately? I can't figure this out in terms of the limitations on the Roth IRA.

I'm no expert. I had these same questions. From what I understand the limit is $4000 each. You both would have seperate accounts.

"# Married filing separately and living apart:

If you are married but file separately and have lived apart from your spouse for the entire tax year, your Roth IRA contribution amount will be reduced if your adjusted gross income is more than $95,000. You Roth IRA contribution limit will be eliminated if your adjusted gross income reaches $110,000.

# Married filing separately and lived with your spouse:

If you are married filing separately and lived with your spouse at any time during the tax year, your roth IRA contribution amount will be reduced when your adjusted gross income exceeds $0.00 and will be completely eliminated when your adjusted gross income reaches $10,000."

http://retireplan.about.com/cs/irasandroths/a/roth_ira.htm

[Alex+R 0]

I'm no expert. I had these same questions. From what I understand the limit is $4000 each. You both would have seperate accounts.

"# Married filing separately and living apart:

If you are married but file separately and have lived apart from your spouse for the entire tax year, your Roth IRA contribution amount will be reduced if your adjusted gross income is more than $95,000. You Roth IRA contribution limit will be eliminated if your adjusted gross income reaches $110,000.

# Married filing separately and lived with your spouse:

If you are married filing separately and lived with your spouse at any time during the tax year, your roth IRA contribution amount will be reduced when your adjusted gross income exceeds $0.00 and will be completely eliminated when your adjusted gross income reaches $10,000."

http://retireplan.about.com/cs/irasandroths/a/roth_ira.htm

Whaaa? My adjusted gross income certainly exceeds 10,000. I have no guess why they put limitations on those who want to file separately from their spouse.

[Hilarious Clinton 452]

You get a better tax break filing together(Usually). Why would you file separately?

[Alex+R 0]

You get a better tax break filing together(Usually). Why would you file separately?

I don't think I would. But perhaps later. Also I don't know, taxes might get kind of complicated these next few years what with the ol' immigration. I dunno.

[Hilarious Clinton 452]

You get a better tax break filing together(Usually). Why would you file separately?

I don't think I would. But perhaps later. Also I don't know, taxes might get kind of complicated these next few years what with the ol' immigration. I dunno.

I use Turbo tax and it will show you what the best way to file is. You can run it through different scenarios to see what it best.

[w¡n9Nµ7 §£@¥€r 123]

Exactly. Use TurboTax, figure your taxes out both ways and go the way that reduces your tax liability. Why pay Uncle Sam more than you need to?

[clloyd 0]

IRA's have a "early withdrawal" penalty if you take money out before a certain age, mutual funds do not.

This is absolutely not true with a ROTH IRA. At any time, you can pull out any or all of your initial investment with no penelties (no tax either, because it's your post tax money to begin with.) However, if you pull out earnings, that is when you get into paying penelties. The same is not true with a traditional IRA and a 401(k). (also a ROTH 401(k)) I would not recommend taking any money out of these unless and untill you know the tax consequences, and accept them. In a lot of cases I've seen, it's a 10% penalty and tax at your marginal rate. Not a nice thing to find out when you do your income taxes for the year.

It has been mentioned above, but I'll mention it again. Generally, when you have an IRA, you can invest in whatever you want. I have my ROTH in a Franklin growth fund, which I think is a mutual fund. You can have it in money markets, stocks, etc, etc. If you invest in mutual funds outside of a tax favoured account, you are liable for any taxes on earnings for the year. Generally this is no problem figuring out, as you are given a tax statement that you report to the IRS.

[Alex+R 0]

All right. I want me one of those Roth IRAs. I can just kind of... put in 500 dollars and then keep paying? Or do I need more principal? Should I just em, do this through my wee bank?

After that I'll consider separate mutual funds?

I feel like such a *girl*

[clloyd 0]

Call your bank and ask. I know credit union does IRA's.

[Hilarious Clinton 452]

All right. I want me one of those Roth IRAs. I can just kind of... put in 500 dollars and then keep paying? Or do I need more principal? Should I just em, do this through my wee bank?

After that I'll consider separate mutual funds?

I feel like such a *girl*

You can start with $500 and add $50 a month if you like. Up to $4000 a year. You can use your wee bank too. Don't worry we all have had the same questions To confuse things... you can invest the money in your Roth in a mutual fund. You bank should help you get started in picking the right fund.

[Alex+R 0]

All right. I'll go check out the Roth at my bank next week. From there who knows what will happen

Thanks everyone for your help--esp. Luckystrike.

[clloyd 0]

Also examine the fee structure, to make sure it's really better to pick one investment option over the other, at least initially. (I mean investment option within the IRA.)