A few days ago my mother sent me an article from the New York Times (I believe) about how you should open a Roth IRA as young and as soon as possible. Since then she's been really pushing me to do research on it and strongly consider opening one. I have, but the whole world of investing money and retirement accounts truly baffles me.
I'm 21 and have only ever had part-time and summer jobs. I currently have only a few expenses, although once I graduate college this year I'll have about $20,000 in student loan debt. I have no credit card debt and plan on keeping it that way. My savings account is low, mostly because I'm still recovering from my study abroad trip, but nearly all of it will go towards utilities and groceries and school expenses this coming year--my parents are awesome and will pay my rent and public transport pass. I don't have an emergency fund, but I am lucky enough to have a family that will help me out in case of a true emergency.
I already know I won't be able to max out my contributions, so my goal would be at least $1000 for this year. From the research I've done, Sharebuilder allows you to open with any amount but tends to have more fees, while Vanguard has a $1000 minimum but is better on the fees front.
I would love some input on this, since I know many of you have Roths. Is it worth it for me to open one at all? Would the no-minimum Sharebuilder be a good starting point until I get the hang of this stuff, or should I save up the rest of this year to open the Vanguard? Anything I'm totally neglecting to consider?
Roth IRA Decision
August 5th, 2014 at 05:17 am
August 5th, 2014 at 01:17 pm 1407241044
Even if you never add to this, it'll still be a good idea. If you can add even a little bit - $50 or so a month - you'll be happy that you did.
Vanguard is really the best option, and Target Date fund is the absolutely perfect choice for you.
August 5th, 2014 at 02:07 pm 1407244033
I also would save up the $1000. Make your goal year end or at least by April 15 2015 to count for 2014. No one needs to pay excess fees!
August 5th, 2014 at 02:15 pm 1407244552
But before opening a Roth, if I were in your shoes, I would stop and consider if reducing student loan debt would be an option. In other words, is taking LESS in student loans an option, rather than funding a Roth? The less debt you have when you graduate, the better shape you'll be in.
August 5th, 2014 at 02:37 pm 1407245860
Well, let me put it this way. I don't even know if I could have saved up $1,000 during one year in college, working like 5 jobs, but when I graduated I started making $20k more per year and just saved my entire raise. Looking back, I am glad I did not have unnecessary stress with my low income college situation. Any loss for not contributing to retirement was easily made up in year 1 post college. NO matter how I slice it I don't think that utilizing an IRA more in college would have given me any edge.
It might be different if you have more parental help and were not accruing student loan debt. It's fine advice for people with money.
Agreed with the others - I would stick with Vanguard. Target retirement date funds are an excellent place to start.
August 5th, 2014 at 02:47 pm 1407246460
August 5th, 2014 at 03:32 pm 1407249163
August 6th, 2014 at 03:48 am 1407293338
Thank you everyone for all of your input! I think I'm going to work on saving towards the minimum, do a little more research on the Target vs. Star options, and then decide if I want to start paying off my loans or start a Roth. As of right now I'm definitely leaning towards the Roth--I have mostly subsidized loans and I pay off the interest I do earn every month to keep it as low as possible, and I'm aiming to be rid of at least half of my debt after one year from graduation. And I think I would like to start on some retirement savings in the meantime
August 6th, 2014 at 02:38 pm 1407332329