IRAs: Where and how to invest

[CalBoy]

Ok, so looking back on 2007, I realize that I made a decent lump of money for a college student, so I need a way to "invest" it that is better than my current Orange account.

I've got enough to finish my BA, but law school will be a whole other story. So, I was thinking of opening up a Roth IRA. Before I do, I have some questions (hence the thread).

1) What's the last day in 2008 that I can open a Roth 2007 IRA?

2) What are some good companies to go with? Why?

3) When I open my IRA, will most companies allow me to choose my investments or do I have to select one of their predetermined 'spreads?'

4) Do you think opening up the IRA at this time is a good idea? Since I figure law school will be too expensive for the measly $4,000 limit to be of any real significance, I thought that it made more sense to invest the money now and just get an additional $4,000 loan when I'm ready for law school. Thoughts on this?

5) Do you have any other tips that can be helpful?

Thanks a lot for the advice.

 

[tefleming]

First, I'm not a CPA or any other sort of Financial Advisor, so please do your due diligence and do not rely solely on my advice.

The last day you can make a 2007 contribution is 4/15/2008.

Fidelity and Vanguard are both good companies (they're good because they run good mutual funds, which are what you likely want to invest in).

You can select from a wide-variety of mutual funds (might also have the option to invest in stock, CDs, etc).

I don't know if it's a good idea - not sure if student loans would be dis/advantaged by your holdings.

Otherwise, after you invest it, leave it alone

//EDIT: afterthought: i'm a fan of target funds. just pick the year you think you'll want to retire and pick that fund. the mix between stocks and bonds shifts over time (most risky now, less risky as time goes on.) I chose the year when I'll be 57

 

[hikeNM]

Ok, so looking back on 2007, I realize that I made a decent lump of money for a college student, so I need a way to "invest" it that is better than my current Orange account.

I've got enough to finish my BA, but law school will be a whole other story. So, I was thinking of opening up a Roth IRA. Before I do, I have some questions (hence the thread).

1) What's the last day in 2008 that I can open a Roth 2007 IRA?

2) What are some good companies to go with? Why?

3) When I open my IRA, will most companies allow me to choose my investments or do I have to select one of their predetermined 'spreads?'

4) Do you think opening up the IRA at this time is a good idea? Since I figure law school will be too expensive for the measly $4,000 limit to be of any real significance, I thought that it made more sense to invest the money now and just get an additional $4,000 loan when I'm ready for law school. Thoughts on this?

5) Do you have any other tips that can be helpful?

Thanks a lot for the advice.

Good question, and I'd like to hear others opinions.

Here are my answers. (And by no means do I know for sure they are correct. Somebody please correct me if I'm wrong!)

1. AFAIK, you can open an IRA any day in 2008. For 2008, there's a $5000 maximum you can deposit.

2. & 3. I'll give you my situation. I recently opened a Roth IRA with TD Ameritrade. The allocation of funds, once the money is inside the IRA, is completely up to me. I have several mutual funds along with stand-alone stocks. I could put the money into Bonds or CD's if I wanted.

On the other hand, my wife has her IRA with American Funds. Now that I think about it, she chose them because her broker at Edward Jones used them. American Funds does the work within it. I have no idea how the money is allocated. It will be interesting to see which does better.

4. Personally, I see IRA's as not for the here and now. They're for when I'm 65 and looking for the rocker.

I hope this helps and I hope others have advice too! I'd like to hear it.

 

[ucfgrad93]

2. & 3. I'll give you my situation. I recently opened a Roth IRA with TD Ameritrade. The allocation of funds, once the money is inside the IRA, is completely up to me. I have several mutual funds along with stand-alone stocks. I could put the money into Bonds or CD's if I wanted.

This is my situation as well. In addition they also let you do some limited option trading as well. I made over 30% in my IRA last year selling Apple and RIMM covered calls.

 

[WildCowboy]

I use Vanguard...terrific company.

You can put your money wherever you want. Vanguard has a whole host of funds, some mirroring indexes (these are good because they have very low expense ratios), while others are more specialized. Tons of flexibility.

Because you can only put in a certain amount of money per year, it is crucial that you do so whenever you can. Because if you don't, you can't make it up later. And at this stage of your life, that "first in" money will have a lot more time to grow than money put in later. Go with the IRA contribution plus a student loan at a low interest rate...best for the long-term.

 

[obeygiant]

Scottrade. Roth IRAs starting at 500 with 7 dollar trades. You can get in on the recently re-opened Fidelity Magellan Fund. Use me as a referral and we both get three free trades. Go!

 

[CalBoy]

Wow great responses so far.

The last day you can make a 2007 contribution is 4/15/2008.

I'll be sure to double check this, but this seems very logical. Thanks.

Fidelity and Vanguard are both good companies (they're good because they run good mutual funds, which are what you likely want to invest in).

Mutual funds do seem like a good idea. Ahh so much more research to do!

You can select from a wide-variety of mutual funds (might also have the option to invest in stock, CDs, etc).

So Vanguard offers a nice variety of options? That sounds good. I was worried that I would only have something like 3 choices (safe, moderate, and risky or something like that).

I don't know if it's a good idea - not sure if student loans would be dis/advantaged by your holdings.

Well I might work between my BA and law school (as most law school students do), so I think most law school loans understand that applicants might have some 401k/IRA money. IIRC, money in an IRA is viewed as a "semi" asset, it doesn't have the same weight as hard cash.

Otherwise, after you invest it, leave it alone

That's why I'm looking into IRAs! I'm afraid I'll forget all about retirement if I don't invest in one now.

//EDIT: afterthought: i'm a fan of target funds. just pick the year you think you'll want to retire and pick that fund. the mix between stocks and bonds shifts over time (most risky now, less risky as time goes on.) I chose the year when I'll be 57

Target funds sound great, but they're not for me at this time. I don't know when I might need the money so I think I'll save target funds for when I'm more "settled." (but thanks for the tip all the same )

1. AFAIK, you can open an IRA any day in 2008. For 2008, there's a $5000 maximum you can deposit.

Well I don't know about 2008 yet, it isn't over!

But I think that 4/15/08 makes sense for 2007 IRAs (for which the limit is $4,000).

2. & 3. I'll give you my situation. I recently opened a Roth IRA with TD Ameritrade. The allocation of funds, once the money is inside the IRA, is completely up to me. I have several mutual funds along with stand-alone stocks. I could put the money into Bonds or CD's if I wanted.

Ok so it sounds like there is great flexibility with how I manage funds.

When you say CDs, what kinds of return do you see on those? (trying to gauge how well they stack up-no pun intended).

4. Personally, I see IRA's as not for the here and now. They're for when I'm 65 and looking for the rocker.

Well I'm 20 so I still have a great deal of time, but I figured now is a good time since the money will have plenty of time to grow. That's why I think an IRA will be good because I'll forget I have the money until I am ready for the rocking chair.

I use Vanguard...terrific company.

Second recommendation for Vanguard; I'll be looking them up shortly.

You can put your money wherever you want. Vanguard has a whole host of funds, some mirroring indexes (these are good because they have very low expense ratios), while others are more specialized. Tons of flexibility.

Does Vanguard charge fees if I change the investment scheme? Or do I get a certain amount of "reallocation" points per year?

Go with the IRA contribution plus a student loan at a low interest rate...best for the long-term.

That's what I was thinking. I can get the loan at nearly the prime rate as a student, while my IRA could easily earn 3-4% more. Seems like the better way to invest right?

 

[CalBoy]

<digs up old thread>

Ok, so I'm pretty positive I'm going to open my IRA with Vanguard, but I have a question for anyone knowledgeable about this stuff: do I need to use a separate tax form?

It's a Roth IRA so the money is post-tax anyway, but do I need to use a form other than the 1040EZ? I don't really have any deductions or anything complex, so I wasn't sure how IRAs were treated by The Tax Man™.

Thanks.