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Author: RedRaider04 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75799  
Subject: Re: How do I Invest in an IRA? Date: 6/11/2003 6:51 PM
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Howdy Fellow Fool,

Im 21 and in college too and I have my Roth at Scottrade. I opened it last May and I have been more than happy with it. By earned income we mean that you must have $X (greater than or equal to how much you contribute to your IRA) on your income taxes for this tax year. IRAs are tax sheltered acounts because you dont have to pay taxes on your capital gains (if you have any, which you probably will) upon retirement. The two most popular IRAs are Traditional and Roth IRAs. I would suggest the Roth...let me explain. The traditional IRA lets you contribute $3000 per year (this is going up next year or the year after I believe) just like a Roth, but you can deduct your contribution on your taxes. With the Roth, whatever you contribute must be "after tax money", meaning that when you get your paycheck and Uncle Sam already took his part out in income tax, then the rest is yours. With the rest that is yours, you can put in the Roth. The Roth would probably be a better idea because we are in college and probably dont make much money (atleast I dont make much), thus meaning we are in a lower tax bracket. Since we are in the lower tax bracket we dont have to worry about paying too much, if any, come April 15th of every year...meaning that it wouldnt really help to deduct the contributions on our taxes. I dont know how much you know about IRAs so dont be offended if you think Im dumbing this down. As for buying an index fund in your IRA...I say good idea and also its really easy. Thats what I DCAed (Dollar Cost Averaged) into my Roth all last year. I went with VTSMX, but you can look around here at the Fool or other places to decide for yourself. There is an index funds board, so you might want to ask over there. For more on IRAs...the Fool has a whole section on it you might want to check out. (See link below) It was really helpful before I opened mine. As for where to open your IRA...I have mine at Scottrade and have been really happy. Disclaimer: I have been an intern at my local Scottrade office for about 3 weeks now. Ive had my Roth there for just over a year. The college investment club Im in has had an account there for almost 2 years. And I also have a little over 3-year-old taxable account at Datek/Now Ameritrade. And I also have 3 DRiPs. And as for investing in college...it CAN be done, and Im glad you are thinking ahead. I had to work really hard last year to reach my goals, and I did it by picking up extra shifts, working late nights, putting down that DVD in the store and walking away, and not drinking too much. It was hard to explain to my girlfriend why I tried to invest so much, but I just told her that we will retire before we know it. She didnt make a big deal of it after that. I hope I answered some of your questions and got all of that right. Best of luck with the IRA and feel free to ask plenty of questions...even if you think they are common sense or dumb.

Have a good one!
Neal...thinking this board is turning into a college hangout now.


The Fool's IRA Center:
http://www.fool.com/ira/ira.htm?source=LN
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