Graduated Learning: Life after College

I got my degree, I got a job…now what?

Opening an IRA: No Excuses March 28, 2012

Filed under: Personal Finance — Stephanie @ 12:06 am
Tags: , , ,

When I was younger and didn’t feel like doing the dishes, I’d make excuses.  The top excuse usually was “I don’t know how to do it!”  Of course we know that’s a ridiculous lie.  And I’d still have to do the dishes.

We all make excuses.  It’s too hard!  I don’t know how to do it!

No.  No more excuses.

I’ve talked before about how it’s a good idea to open an IRA.  And I’m especially keen on the Roth IRA as a good way to diversify my tax liabilities when I retire.

So, I’m here to show you that there are NO EXCUSES.

Disclaimer:  I’m not a financial advisor or other money professional.  I’m just a blogger.  But I want you to pay attention to what I say anyway.  You don’t have to.  But that’s all I can offer.

Excuse number 1:  I don’t have any money to do it!

No.  You do.  You just don’t realize it yet.  Depending on what company you end up opening an IRA with, you’ll have a certain minimum initial or repeating investment.  If you don’t have enough for the initial investment, start stashing away $10 or $20 in a savings account.  Maybe you’re getting a tax refund this year?  There’s some money you can use!  When you build up enough, go for it.  As I said, it depends who you open an account with, which leads me to excuse number 2…

Excuse number 2:  I don’t know how!

As I mentioned before, that’s a lame excuse.  And if you honestly don’t know how, guess what?  It’s easy.  You pick a discount brokerage or bank (I’ve used Fidelity, I know Vanguard is highly recommended, I welcome other good suggestions in the comments).  Check out their website to find out minimum investment requirements, fees, benefits, etc.  If you’re still confused, call them up.  Tell them what you want to do, find out what is required of you to avoid fees, taxes, etc.  Then do it!

Excuse number 3:  I don’t want to lose money!

Guess what?  NOBODY DOES!  You don’t go to Las Vegas hoping to “strike it poor”.  Yes, investing in the stock market (and in bonds, ETFs, etc.) has risks.  There’s no guarantees.  That ridiculous 2008 downturn?  I remember it too!  But here’s the thing.  An IRA is a really good idea.  You’re putting money away for your retirement.  There are tax benefits to having an IRA.  And if you follow the theories of John Bogle, buying low-cost index funds and invest over the long-term, you’re pretty likely to come out ahead over the long run.  And if you consider that keeping money in a regular savings account doesn’t really keep up with inflation, the market is a good way to go.  Which leads me to:

Excuse number 4:  I don’t know what to invest in!

As I said before, I’m not a financial advisor.  As they said in this Marketplace Money interview, the most important part is just starting that account.  You can start by contributing whatever you can (up to $5k, or $6k if you’re over 50 years old) each year.  Your best bet to start is to invest in a low-cost index fund or life cycle fund.  As you build your account, you can start learning more about investing (by reading books, magazines, blogs, listening to podcasts/radio shows), and diversify as you see fit.  If you want, you can always talk to a fee-only certified financial planner or advisor to get some advice.

So.  What do you think?  Any other excuses you can come up with?  Anything I got wrong here or left out?  Where do you find your investment advice?  Let me know!

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6 Responses to “Opening an IRA: No Excuses”

  1. deenadollars Says:

    My excuse for not starting a Roth yet is that I have been funding my retirement through a 401(k) and I get a match. I suppose this is a sub-excuse of your “I don’t have enough money to do it!” excuse, because I should contribute up to the match in the 401(k) and then put even more aside for the Roth. However, I tell myself that it is better to take the free money if I am only going to do one or the other.

    • Stephanie Says:

      Yeah, I think if you have a choice between free money and no free money, I’d go with the free money 😛
      But I definitely recommend trying to stow away a little extra money towards a Roth IRA. Like I said above, every bank/company is different: some want a certain amount for an initial investment, some might waive that initial amount if you commit to a certain amount contributed monthly. Check out the minimums and see if you’ll have enough to start on a Roth. My top two priorities for retirement was contributing up to the match in the 401(k), and maxing my Roth each year.

      Also, another added bonus of a Roth IRA (or regular IRA) besides the tax benefits is that sometimes you actually have better investment choices than with your 401(k). My old company had the crappiest investment choices with huge expenses. My current job is way better, fund-wise, but it’s nice knowing I can find some low cost index funds in an IRA.

  2. I definitely get caught up in the “I don’t have money.” But if you plan ahead you always do.

    • Stephanie Says:

      I’ve found that by setting an automatic transfer from my checking account into savings (or even better, getting a paycheck directed to both a checking and savings account), the money builds up without me even realizing it. I’m so grateful that I set up an auto-transfer to savings years ago, because my savings account has grown without me worrying about it!

  3. MommaStar Says:

    I’m ashamed to admit I have a traditional IRA that’s been sitting still for over 3 years now. My current company doesn’t offer any retirement plans so I’ve used that excuse for years. I’ve been wanting to do something with the IRA but just don’t know where to start. Enough excuses, that’s after reading your post 🙂 Time to get it moving, literally.

    Great post!! It’s what I and I’m sure a lot of people needed.

    • Stephanie Says:

      You have a lot of options right now. You can either contribute more to the IRA you have, open a Roth IRA and contribute to that, contribute to BOTH (as long as you don’t go over $5k/year total), or rollover your traditional IRA to a Roth IRA (depending on your tax situation). I’m not sure which is the best for your current financial/tax situation, but read up on those and get moving!
      Also, I’d ask your company’s HR department about what other options they have. Also, you and enough of your fellow employees come forward asking for a work-sponsored retirement plan, maybe they’ll cave and start one! Good luck!


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