Investing Wisely in a Roth IRA
Every time you earn money on your stocks, bonds or mutual funds, you should put some of the money aside into your Roth IRA (or IRAs if you have more than one). One of the most important things a person planning for their future can do is to save now and save often. Compound wealth happens over time, and you won’t get rich if you take too many risks.
Roll those Dividends
When you invest in the stock market, you’ll get a check back regularly (monthly, quarterly or yearly depending on the stock) that you can cash in on, reinvest in the stock, or put it towards your Roth IRA. You should be putting a portion of the money towards your retirement account, if only to hit the $5,000 limit of your investment per account. Do this over a five year period and in 40 years you will have tripled your investment without even trying.
If you have an investment broker, or if you have a 401(k) or employer run retirement account, you most likely have an investment in a mutual fund. You can roll your 401(k) into a Roth IRA, but you will run into some problems. Many employer contributions are pre-tax, so you might have to pay taxes in a higher tax bracket later and you’ll end up losing money on it. It’s better to make sure the money was taken from taxed earnings so you don’t have to pay taxes again, or you lose all of the advantages of the Roth account altogether.
Mature Bonds Help your Account Mature
After you’ve had some money in your account for a while (remember the 5 year rule), you can take distributions and invest in bonds. Right now bonds are a hot item because of the debt default, and the economy will improve in the future so you’ll always end up making more on your investment! Once these bonds mature, you’ll want to roll them over into a single IRA or multiple and let them accrue more interest for retirement.
Saving for retirement is easy when you invest wisely. There are other kinds of investments you can roll into different IRA accounts like rental income, business investments and more. There are income caps on Roth IRAs, so if you start earning over $55,000 ($120,000 for married couples) you will no longer be eligible for this kind of account. By investing wisely, you can easily start moving towards that target, so get started today!