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<<I was actually thinking of investing the $2000 I currently have saved outside of living needs into an index stockwithin an IRA. My understanding is this would be easy to sell if an emergency came up that I could not handle with either my current income or with my parents help.>>

How about just putting the money into a regular mutual fund, not an IRA? Sure, you pay the taxes on the initial investment, but you save the penalties if you do need to withdraw the money.

Keep in mind that with an IRA, you essentially lose 30% of your money if you withdraw it before age 59 1/2 (some exceptions apply). If you invest the $2000 into a regular mutual fund with after-tax dollars, you get back 100% of your money, plus growth, minus taxes ON THE GROWTH ONLY (assuming your mutual fund goes up in value ;)).

Down the road when school is over and you are financially stable, you could then open an IRA with the money that you had in the mutual fund. Or you could invest it in other ways which may produce other retirement money.

Remember, you don't have to just retire on 401k and IRA money. You can also invest on money that you invested privately (shudder ;)).

Good luck in school!

David (But I'm not) Boring
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