I just had a question about IRA's. I am currently 22 years old and was wondering about IRA's. I was told that if you start an IRA with 2,500 dollars that by the time I retire it would be worth 500,000 dollars. Is this really realistic? If it was this easy... why wouldn't everyone have an IRA. Is it possible to lose your money in an IRA or are they safe? Thanks for any info
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To remove first post, remove entire topic.
I just had a question about IRA's. I am currently 22 years old and was wondering about IRA's. I was told that if you start an IRA with 2,500 dollars that by the time I retire it would be worth 500,000 dollars. Is this really realistic? If it was this easy... why wouldn't everyone have an IRA. Is it possible to lose your money in an IRA or are they safe? Thanks for any info
An IRA is just an investment vehicle. It is only as good as the investments you put in there. You invest poorly, you will lose your money. If you make wise, sound investments, it can grow exponentially.
Its advantage (the reason people have properly suggested it to you) is the tax breaks it offers. Traditional IRA's allow you to save money on taxes up front. But when you make withdrawals later in life, that money is taxed. ROTH IRA's allow you to pay taxes up front, but then all withdrawals (including earnings) are tax free later in life. I myself have a ROTH, and would suggest that, but if you would rather take your tax deductions up front, a traditional is the way to go.
If you have money to invest, putting it in an IRA will give you the most bang for you buck (because of the tax savings). You still have to be wise about your investments, or just like anything else, you could lose your money.
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An IRA is just an investment vehicle. It is only as good as the investments you put in there. You invest poorly, you will lose your money. If you make wise, sound investments, it can grow exponentially.
Its advantage (the reason people have properly suggested it to you) is the tax breaks it offers. Traditional IRA's allow you to save money on taxes up front. But when you make withdrawals later in life, that money is taxed. ROTH IRA's allow you to pay taxes up front, but then all withdrawals (including earnings) are tax free later in life. I myself have a ROTH, and would suggest that, but if you would rather take your tax deductions up front, a traditional is the way to go.
If you have money to invest, putting it in an IRA will give you the most bang for you buck (because of the tax savings). You still have to be wise about your investments, or just like anything else, you could lose your money.
I am a public accountant (corporate audit, not tax), so I am far from an expert in tax law, but I did think those two were mutually exclusive in the sense that you either put up to $4K in a ROTH or up to $4K in a traditional IRA. I already contributed $4K to my ROTH for 2007. Can I also contribute $4K to a traditional IRA for 2007 (through April 15th)? I would love to as it would allow me to knock my AGI to where I could get that full $600 rebate, I just did not think you could fund both. I am thinking you meant doing a traditional 401K and a Roth IRA, but let me know if I am wrong.
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Depeche,
I am a public accountant (corporate audit, not tax), so I am far from an expert in tax law, but I did think those two were mutually exclusive in the sense that you either put up to $4K in a ROTH or up to $4K in a traditional IRA. I already contributed $4K to my ROTH for 2007. Can I also contribute $4K to a traditional IRA for 2007 (through April 15th)? I would love to as it would allow me to knock my AGI to where I could get that full $600 rebate, I just did not think you could fund both. I am thinking you meant doing a traditional 401K and a Roth IRA, but let me know if I am wrong.
I am a public accountant (corporate audit, not tax), so I am far from an expert in tax law, but I did think those two were mutually exclusive in the sense that you either put up to $4K in a ROTH or up to $4K in a traditional IRA. I already contributed $4K to my ROTH for 2007. Can I also contribute $4K to a traditional IRA for 2007 (through April 15th)? I would love to as it would allow me to knock my AGI to where I could get that full $600 rebate, I just did not think you could fund both. I am thinking you meant doing a traditional 401K and a Roth IRA, but let me know if I am wrong.
I just checked and I stand corrected. You are right. Can't assume anything in tax law. I don't do a traditional IRA since I have a SEP-IRA and my wife a 401(k). All of the different rules are so convoluted it's ridiculous. Keeps accountants in biz though.
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Quote Originally Posted by Wake2002:
Depeche,
I am a public accountant (corporate audit, not tax), so I am far from an expert in tax law, but I did think those two were mutually exclusive in the sense that you either put up to $4K in a ROTH or up to $4K in a traditional IRA. I already contributed $4K to my ROTH for 2007. Can I also contribute $4K to a traditional IRA for 2007 (through April 15th)? I would love to as it would allow me to knock my AGI to where I could get that full $600 rebate, I just did not think you could fund both. I am thinking you meant doing a traditional 401K and a Roth IRA, but let me know if I am wrong.
I just checked and I stand corrected. You are right. Can't assume anything in tax law. I don't do a traditional IRA since I have a SEP-IRA and my wife a 401(k). All of the different rules are so convoluted it's ridiculous. Keeps accountants in biz though.
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