First, let us talk about mutual funds. Most people understand what stocks are but many people do not understand mutual funds. Mutual funds are managed by a professional that uses investor’s capital to purchase a diverse group of stocks. You usually get options on the growth option of the funds offered. The more aggressive, the more you can make or lose overtime. Some of the best mutual fund portfolios consist on a variety of stocks as to not put all your “eggs in one basket.” An example would be your fund has included technology, and the technology market is down, hopefully the other stocks in the mutual fund are up to compensate.
With tax season in full swing, I must ask what are you going to do with your refund? Are you going to put money into a traditional IRA to reduce your taxes? Every year, I take advantage of the tax breaks by sending money to my IRA. You are allowed until the tax deadline filing date to do so for the previous tax year. The more you contribute, the more refunded to you as is puts your tax liability lower. Of course there are maximum limits on what you can contribute depending on your age and there is an income cap on who gets these tax breaks (Under $58,000 single, under $92,000 married get 100% tax write off)
A traditional IRA is tax-deferred. What this means is, you get to write it off of your income received and you pay taxes when you retire. The plus, most people are in a lower tax bracket when they retire and deducting the contribution off your income now, actually puts your tax liability lower. The max contribution is $5,000 if you are under 50 but if you are over, $6,000. A traditional IRA you will get heavily penalized for an early withdrawal, the age for withdrawal is 59 ½ . A roth IRA grows tax free but is an after-tax investment. In other words, you do not write off on taxes so this allows you withdrawal the investment with out the stiff penalties that you would get with a traditional.
A 401k will give you the best results, especially if you have an employer matching 401k. In 2012, you can contribute up to $17,000 tax deferred (plus any employer matching dollars).
You should realize it is never too late to work on your retirement, but the earlier the better. Just look at this example:
A 20 yr old that deposits $200 a month into any fund/401k/IRA that earns an average 5% would have $535,954 at retirement age. The investment was $120,000 the profit $415,954.
A 40 yr old must deposit $640 a month would have $534,864. At this age now the investment had to be $230,400 almost double the money spent by the 20 yr old only to earn $230,400. That makes the profit $184,446 less than the 20 yr old made by starting early. You have to love compound interest!
Want to retire a millionaire? At the age 20 if you can deposit $400 a month and earn a low 5% return compounded at retirement you would have $1,069,729.77 . That is profit of $608,929.77!
There are many good growth mutual funds that are averaging in the 10% plus range so you can imagine the possibilities! Invest in you!
Source: http://www.beaufortonline.com/encore/pot-of-gold-your-retirement-and-you-retire-a-millionaire/
With tax season in full swing, I must ask what are you going to do with your refund? Are you going to put money into a traditional IRA to reduce your taxes? Every year, I take advantage of the tax breaks by sending money to my IRA. You are allowed until the tax deadline filing date to do so for the previous tax year. The more you contribute, the more refunded to you as is puts your tax liability lower. Of course there are maximum limits on what you can contribute depending on your age and there is an income cap on who gets these tax breaks (Under $58,000 single, under $92,000 married get 100% tax write off)
A traditional IRA is tax-deferred. What this means is, you get to write it off of your income received and you pay taxes when you retire. The plus, most people are in a lower tax bracket when they retire and deducting the contribution off your income now, actually puts your tax liability lower. The max contribution is $5,000 if you are under 50 but if you are over, $6,000. A traditional IRA you will get heavily penalized for an early withdrawal, the age for withdrawal is 59 ½ . A roth IRA grows tax free but is an after-tax investment. In other words, you do not write off on taxes so this allows you withdrawal the investment with out the stiff penalties that you would get with a traditional.
A 401k will give you the best results, especially if you have an employer matching 401k. In 2012, you can contribute up to $17,000 tax deferred (plus any employer matching dollars).
You should realize it is never too late to work on your retirement, but the earlier the better. Just look at this example:
A 20 yr old that deposits $200 a month into any fund/401k/IRA that earns an average 5% would have $535,954 at retirement age. The investment was $120,000 the profit $415,954.
A 40 yr old must deposit $640 a month would have $534,864. At this age now the investment had to be $230,400 almost double the money spent by the 20 yr old only to earn $230,400. That makes the profit $184,446 less than the 20 yr old made by starting early. You have to love compound interest!
Want to retire a millionaire? At the age 20 if you can deposit $400 a month and earn a low 5% return compounded at retirement you would have $1,069,729.77 . That is profit of $608,929.77!
There are many good growth mutual funds that are averaging in the 10% plus range so you can imagine the possibilities! Invest in you!
Source: http://www.beaufortonline.com/encore/pot-of-gold-your-retirement-and-you-retire-a-millionaire/
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