IRA…Traditional or Roth?? Stock trade or mutual funds?

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    a colleuge of mine mentioned that he thinks I should open an IRA account. I am 22 and still attend college in the evenings am I too young to be putting away money for retirement?? if not, which form of IRA should I go for?? Is it better to manage it on my own thru stock trade or is that too risky?? is there more assurance in mutual funds?? I have clients whos brokerage firms loose thousands for them….I dont need anyone to loose money for me, I can do that on my own 🙂


    No, you are not too young. The money you put in today will yield the most results by the time you retire. It has 45 or more years to grow, so it will matter more.

    To answer the “what type” question, I need to know your current tax bracket. Almos always, you will be better off with a Roth, but there are exceptions.

    If you have the time, you can manage it yourself. But do you have the time or the inclination or the knowledge.

    One nice alternative to managing it yourself are Vanguard funds – they have funds with very low management fees, and some indexed funds with infinitessimally low management fees.


    Former Certified Financial Planner


    Pay off any debt you have first, but then go get a Roth IRA. Go with growth stock mutual funds. My preference is for index funds.

    The difference between a normal IRA and a Roth is that with a normal IRA you pay taxes when you take the money out, with a Roth you pay taxes now. But since between age 22 (your age now) and age 60 the money will have grown A LOT you are better off paying taxes now on a much smaller amount of money.

    As for mutual funds vs single stocks go for the mutual funds. There is too much risk in single stocks. I mean if 10 years ago you had put $25,000 into Enron it would be worth 0 now. With a mutual funds you average out the ups and downs over many many stocks.

    FWIW Warren Buffet recommends index funds and puts much of his money into them


    Thank you!! Is it better to manage your own account or to pay the management fees and have vanguard or another brokerage firm do it? and if so which brokerage do you recommend?


    Roth and Traditional both grow at the same rate, and you end up with the same amount at the end. (Assuming similar starting.)


    Hi, The choice if you should pick a Roth IRA or Traditional should be based on your needs and tax rate. Over the long term studies show there may not be a big difference because in both cases you pay taxes on the money.

    To illustrate: If someone is in the 20% bracket and has $100 and earns 20%. In a Roth IRA he would invest $80 and pay immediately $20 taxes and after earning 20% percent he would have $96. If he would put away the $100 in a Traditional IRA he would invest $100 earns $20 he would pay $24 in taxes and still end up with $96.

    Reason to pick Roth over Traditional IRA.

    Reason to pick Traditional IRA

    In general people are in a lower tax bracket when they retire.

    Roth IRA may become taxable by an act of Law. We just seen changes to the Education IRA HRA Account where more money became Taxable.

    Two odd reasons to USE IRA Account to invest


    Which brokerage firms do you recommend?


    2 b thankful:


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