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articles by Gilda Gazor
Who wants to be a millionaire? If you do, stop stashing cash
under the mattress and start investing and you can be one by the
time you retire. I know it seems so far away, but if you expect to
relax on sandy beaches and drink piña coladas, you must start
planning now.
Get the ball rolling by creating a monthly budget to see exactly
how much you spend and how much you waste. Simply copy down all
expenditures over the course of the month. It won’t take long
for you to realize how fast “buck fifty” adds up to 50
bucks. Maybe next time you will reconsider splurging on that greasy
sandwich and in a retirement fund instead.
The best retirement option banks offer for college students are
Individual Retirement Arrangements. IRAs were created in order to
help you save money on income you’ve earned for your
retirement. This is why the only way to be eligible to open an IRA
account is if you have some type of taxed income.
There are two primary types of IRA accounts: traditional and
Roth. Both IRA accounts grow tax-free, but the traditional IRA is
tax-deductible, which means you will get a break on your taxes
while your money is invested. This may seem like a great idea, but
the problem is that when you start withdrawing money at your
retirement, you will be charged taxes on the money you withdraw.
The Roth IRA is better for students because you can save your
already taxed income and it will grow tax-free and stay tax-free
even when you withdraw. To open an IRA, most banks require an
initial contribution of $500 – $1,000. The first year you may
contribute up to $2,000 and the second year up to $3,000, and so
on.
However, if you’re lucky enough to earn more than $95,000
or are on a 401K plan at your current job, you are ineligible for a
Roth IRA. Awww “¦ too bad, the three students who are actually
in this position probably have their money in Swiss bank accounts
anyway. Otherwise, a Roth IRA account offers many advantages for
those of us who do other less profitable things … like volunteer
to write columns.
Another bonus to opening an IRA is that you can play a little in
the stock market game. The chart provided offers you an estimate of
your earnings if you keep your money only in the Roth IRA. But, if
you want to earn more money, you can buy stocks through your IRA.
Your broker will provide customer service and guidance to help you
choose the safest investments.
There are no tricks or gimmicks to an IRA account. The only real
catch is that you cannot withdraw your money until after you are 59
““ or you will be fined. If you are not ready for a serious
commitment, similar to what you’ve been telling your
“friend” for the past 8 months, don’t be scared
off yet. Banks provide options under special circumstances in which
you can withdraw money before this age. These circumstances include
a first home purchase withdrawal of up to $10,000, medical expenses
and disabilities. On the other hand, if you’re able to resist
the urge to stick your hand in the cookie jar, you can’t keep
earning cookies forever. You must begin withdrawing money from your
IRA by age 70, otherwise you will be fined heavily.
One thing to be careful of are the costly monthly fees banks
charge to have an IRA that could add up to tens of thousands of
dollars. So, do some research and find discount brokers who have
cheaper or no fees. A place to start is at www.fool.com. Here you
can view a chart of the different discount brokers and compare fees
and services.
So, what are you waiting for? Opening an IRA is easier than
signing up for classes on URSA. Start by doing research for a
discount broker, and when you chose one, in most cases you can
apply online and transfer your money from your savings or checking
account straight to your IRA.
Now that you have seen the light, you may reconsider purchasing
those Diesel jeans and start planning to be a millionaire, and I
don’t mean by writing letters to Regis. You can make this an
attainable goal by the time you’re in your mid-60s if you
open your account before April 15 (the new tax year.) So, break the
piggy bank, open an IRA, sit back and start envisioning piña
coladas.