Graduated Learning: Life after College

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

Where should you open your IRA account? April 9, 2014

Filed under: Uncategorized — Stephanie @ 9:47 pm
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This blog post is more of a survey for my readers and a reminder (to open/fund their IRA) than advice.  But I hope everyone who comments has some great insight!

Here’s the deal.  I’ve been obsessed with personal finance since I graduated college in 2006.  I opened a Roth IRA in 2007 and have fully funded it every year.  My fiance and I have also been together since 2007, and he’s read all of my posts about IRAs (Opening an IRA:  No excuses, Should Everyone Contribute to a Roth IRA? and even How often should I contribute to my Roth IRA?).  But he never opened one.  And until we were engaged, I thought “well, that’s none of my concern” and barely nagged him about it.  But now that we’re in this for the long haul, I realized I need to amp up my nagging and get him to open and fund an IRA before the April 15th deadline for 2013 (yes, that’s right, you can fund last year’s IRA up until this year’s Tax Day).  As a note, for 2013 and 2014, the contribution limits for IRAs is $5,500 (or $6,500 if you’re 50 or older).

I thought he had all the information he needed.  But he came back with one more question:

Where should I open my IRA?

It’s a valid question.  There are lots of companies out there.  Most banks, credit unions, and discount brokerages offer an IRA.  But they all have different fee structures and funding options.  Some will waive fees if you set up automatic contributions.

Unfortunately, I don’t actually have the answer for what company to go with.  I opened my IRA at Fidelity mostly because it was a company I had seen my parents using in the past, and it was a well-recognized name.  It later worked out that my new (current) job runs their 401(k) through Fidelity, which proved to be convenient for a number of reasons:  only one login to remember, and I could analyze my entire portfolio in one place.

I put out a quick tweet to seek advice for where to open an IRA.  From DQYDJ, I heard Fidelity, Scottrade, T. Rowe Price, and Tradeking.  Jeff Rose seconded the advice for Scottrade. (Then Scottrade chimed in with a link to an incentive to open an IRA with them).  My (real life!) friend Brian says he has his IRA with USAA, holding Vanguard funds (I agree with the Vanguard funds, I’ve heard really good things about their low-cost index funds).  Then the Debt Free Guys said they like their Schwab account.

So, I don’t know if that helps at all.  Unfortunately, my best advice is to shop around at different companies and see what sort of fees they have, what kind of funds they offer and what (if any) minimum investment requirements there are!  Some funds have very high minimum requirements, though the minimums may be waived if you sign up to auto-contribute to your account.

Lastly, check out the comments as they (hopefully) come in.  I’m always looking to friends for advice, and this is no exception!  Tell me what companies you like (and don’t like) for retirement accounts!  And share your insight for what else to look for in a company!

 

A Graduate’s Guide to Being a Grownup: Retirement Plans June 30, 2013

This is the first in my “Graduate’s Guide to Being a Grownup” series.  I’m hoping to give some introductions as well as in-depth information to help newly minted graduates (and really, anyone who has questions) .

As a reminder/disclosure, I am NOT a financial advisor.  Nor am I an investing expert.  I’m just someone who has been there, done that, and (thinks I) know what I’m doing.

Retirement Plans.  They’re a big topic.  A confusing, frustrating, and sometimes depressing topic.

The basic idea is this:  You work for a while.  Then eventually you retire.  You want enough money to keep you going until you, erm, don’t need money anymore.  So you need to put money away now for WAY in the future, but you don’t really know how much, since expenses and prices will be different when you’re older, and you don’t know how long you’ll need money for.

See, I told you it’s a tough topic.

But here’s what you need to know about retirement plans.

Most of the ones that you get on your own or through work are ways to put away money now so that you’ll have money later.  The main benefit of most of these accounts (over a basic savings or investment account) relates to taxes.  Either you contribute money to your accounts with dollars that haven’t been taxed yet (like Traditional IRAs and 401(k)s) and then get taxed on the money you take out later, or you contribute money that has already been taxed (like Roth IRAs and Roth 401(k)s) and then get to take your money out tax-free when you retire.  For both of these, that means that you’re not paying taxes on the gains in your account EVERY YEAR at tax time.

Some additional benefits can include contributions to your account from your employer (often correlated to how much you contribute).

There are usually quite a few options for what to put into these accounts.  They might be mutual funds, individual stocks, bonds, or even just cash savings.  Basically, you’re saving and investing within an account, just as you would with regular saving and investing accounts.

There is a limit to how much you can contribute per year to different kinds of accounts.  There are income-related limits for some of the IRAs.  And there are maximums allowed for many accounts, though there are catch-up amounts allowed if you’re closer to retirement age (over 50 years old).

Most of these accounts will not let you take out the money until you’ve hit retirement age.  If you do, you may be required to pay penalties or additional taxes.  It’s NOT recommended in most cases to take the money out, though there are some exceptions (depending on account, the reason you are withdrawing)

I’ll go into more detail about the different retirement plans available (in the U.S.) in future posts.  This is just to get you started thinking about saving for your retirement.

For now, you can check out my past posts on IRAs and 401(k)s.  Once I finish the next posts, I’ll link to them below.

Short version:

Retirement plans are accounts you save and invest money in.

A main benefit over regular savings accounts or investment accounts is that you can save on taxes either when you contribute or when you withdraw your money (after you retire).

There are some limits to how much you can contribute each year.  There are maximum contribution limits as well as (in some cases) income limits.

The earlier you start saving, the (likely) better off you’ll be, thanks to compounding interest, or gains on top of reinvested gains.

Your balance can go up or down.  If you’re invested in pretty much any stock, bond, or other tradeable asset, there is risk involved.

This money is meant for your retirement, so there are penalties associated with early withdrawal.

Okay, how’s this so far?  What questions do you have (about retirement or any other post-graduate topics)?  Did I cover everything?  Miss something?  Let me know what you’d like to see in the next Graduate’s Guide to Being a Grownup!

 

 
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