I just got a raise of approximately $100/month. I don't "need" the extra money, and I'm only considered part-time at my job, so I don't qualify for a 401 k just yet.
I'm looking into opening a traditional IRA, but I'm confused. Would I be able to contribute more to it later on? Currently I'm planning on contributing $1200/year into it. Whenever I graduate from grad school though and start a career in my field(in approx. 3 years), I will be able to contribute more. Plus if I get married, won't that affect it somehow?
Can anyone clear this up for me? As you can tell, I'm pretty conrfused on it all and don't understand all that business jargon.
John T2007-06-21T15:03:32Z
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Nicole, the Roth IRA is probably your better choice right now. You pay the taxes up front and it sounds like you're in a low tax bracket now. You get all the money out during retirement, tax free.
The max contribution limit is set by the tax code and increases over time but is currently 4000/yr so yes you can contribute up to that amount at any time you wish from Jan 1st through April 15th of the following year. It's best to max out a prior year during those first few months rather than the current year. (more flexibility)
If you get married, your spouse will have the same limits to contributions but it should not affect yours unless you hit the max income levels or he contributes to yours. The max contributions will remain the same for you.
I consider the 25% tax bracket to be the gray zone between Roth and traditional but it's really more a matter of what you expect to be making during retirement. As a student, I expect you are well below that. As a future grad of grad school, you are likely to retire at higher than that, plus all of the income it has made between now and then.
Good luck. You are on the right path. Start educating yourself on investments such as real estate or stocks or bonds or all three! You're gonna do well.
I suggest you talk to a financial advisor at your bank. He or she is a professional in the business, and can help you clear up the confusion you have regarding the different types of IRAs available, and help you make the right choice. For example, you can open a Roth IRA. You get no tax breaks now, but get the breaks later when you retire and can really use the money! But as I said, talk to your bank's fianacial advisor first.
Yes, you can contribute on a monthly basis. My best advice would be to sit down with an IRA specialist (your bank should have one) and have a one on one talk. All the responses you've recieved are good but if you're confused already, I'm sure they only make it worse because now you're getting too much information to handle! At face value, an IRA is a complicated thing....tons of rules. But, talk with somebody who is trained to keep up with the everchanging rules and you'll be off to a good start!
i would definitely open the ROTH IRA. it is very flexible and you can take money out to buy a house. The limit is $4000 per year. I opened mine with Fidelity. You can invest in mutual funds or a fixed money market account. stocks are obviously more risky, mutual funds are risky too. money market funds, however, will be a fixed rate. i would mix the investments based upon how much risk you can handle. This is a great idea to start. Roth IRAs have a salary limit of $94,000 i think and it's a great idea to max this out as long as you can because your income doesn't get taxed unlike every other method of investing. definitely take advantage of this.
do you ought to make a contribution a needed month-to-month volume to the IRA? If no longer, i might save it open. set aside some money each and each month and on the tip of the 12 months fund it. In a 12 months's time initiate your 401K too.