Hey Gabbers,
Okay so recently I looked at my 401K and wanted to cry. Pretty much 90 percent of my money was put into stocks. And for those of you that have been following how the stock make is going. Well lets just say it wasn't pretty. So I decide to look into other forms of saving for the old me.
Now i didn't know much about them before, but I started looking into IRAs. Individual Retirement Accounts. Now there are several different types of IRAs but the two main types i found were Traditional and Roth. Now they both are good, but depending on your income depends on which one is best for you.
Traditional IRAs is an account in which money is taken for your paycheck before taxes and place directly into a savings account. Now the funds are not takes when they are taken from your paycheck but are taxed when you withdraw them when you decide to retire (starting at 59.5 years old). Now the funds and interest will both be taxed but at that time you will be in a low tax bracket.Now Roth IRAs is money that as already been taxed. Yet the interest you earn through out the years is completely tax free.
Now you can put $5000 a year into an IRA account, and can not with draw it until you react retirement. Now starting to put money into IRA account early in life can save you several thousands of dollars, and save you for paying those horrible taxes.
It may seem early but saving for your future now will help in the long run.
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3 comments:
Great post Steven!! The good thing about your 401K is that you are hopefully continuing to contribute to it. You are young and have time for the money to grow... so it doesn't really matter if the market fluctuates. It will matter if you stop contributing however. Think of it this way, while your total assets may have been reduced, you are now buying shares at lower prices so it should even out in the end and still provide you with a long-run rate of return around 9-10%.
I love my Roth IRA by the way.. in my opinion every one of you should open one. :)
OMG... Great post Steve, I really need to "getta' savin" because the younger the better... Thanks for the reminder!
Steven, I am a little confused. IRA's seem great for saving but clarify this for me about the taxes...Taxes will only be applied to your money when you decide to withdraw it upon retirement? What do you mean about the low tax bracket? I don't understand that part.
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