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Investing

15 Totally Random Facts About People Who Retire With Roth IRA Money

"The best time to start thinking about your retirement is before the boss does." Anonymous

Opening and investing in a Roth IRA will allow you to have a pretty sweet nest egg of tax free money once you are ready to retire.

Now that you are a member of the Roth IRA club, you should know a few totally random facts about people who retire or plan to retire with tax free money.

1) They are much more intelligent than those around them.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

2) They have seen the movie Office Space enough times to know exactly how they envisioned their final day at work.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

3) They enjoy either beaches, skiing, or golfing.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

4) They frequently take videos of themselves relaxing by the ocean.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

5) They enjoy drinking fruity drinks by the beach.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

6) They find math interesting and may not have a TI-83 graphing calculator but they're pretty handy with a retirement calculator.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances
(Calculator Courtesy of Bloomberg)

8) They frequently ask, "what's your number?" to start up a discussion on retirement savings.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

(Courtesy of ING)

9) They secretly love/hate either Dave Ramsey, Suze Orman, or Robert Kiyosaki.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

10) They're not afraid of using travel reward credit cards to book flights around the world.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

11) They'll travel to foreign countries and stop in a new restaurant just for the free fire show.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

12) They think the Roth IRA is a retirement account that is really awesome. Fo sho!

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

13) They know exactly how well balanced their portfolio is thanks to Personal Capital.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

14) They love the Roth IRA so much they're willing to put on a wig to spread the word.

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

 

15) They're vigilant. They know that this list skipped the number 7. They keep an eye on every dollar. Every dollar!

15 Totally Random Facts About People Who Retire With Roth IRA Money | Young Finances

This post is a part of a special Roth IRA series. See the other posts and videos by clicking over to The Ultimate Roth IRA Guide for Young Adults.

Originally posted 2014-08-14 05:00:02.

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Investing

10 Important Roth IRA Rules. Number 7 is a Shocker.

By now you should know that the Roth IRA is a pretty important component to any healthy financial plan for a young adult.

If you missed the reasons why you can watch this video, or read this post.

Now it's time to learn the basic rules for the Roth IRA. I've pulled the most important points together so you won't spend time on what you don't need to know. But if for some reason, you want all of the Roth IRA rules, check out IRS Publication 590.

How Much Can I Contribute to My Roth IRA?

1) If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of $5,500 ($6,500 if you are age 50 or older), or your taxable compensation.
The contribution limits have the potential to change each year. In the last few years they have not changed, but you should double check if they have changed each year the new IRS rules are released.

When Can I Contribute to My Roth IRA?

2) You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year.
If you are contributing for the year 2014, you can contribute for 2014 even into April of 2015 when tax returns are due. This is a great way to catch up if you missed the opportunity to contribute.

What if I Want to Contribute More to My Roth IRA?

3) A 6% excise tax applies to any excess contribution to a Roth IRA.
Double check your contributions before the tax year ends. Request a withdrawal for any extra contributions you've made in order to avoid the excess contribution penalty.

Can I Change My Mind and Open a Roth IRA if I Already Have a Traditional IRA?

4) You can convert a traditional IRA to a Roth IRA. The conversion is treated as a rollover, regardless of the conversion method used.
In order to convert, you will have to pay taxes on the balance of the Traditional IRA. Those are 'before-tax' dollars and they have to be changed into 'after-tax' dollars.

Don't worry.

The IRS will handle that little bit of magic for you.

10 Important Roth IRA Rules. Number 7 is a Shocker. | Young Finances

When Can I Withdraw from My Roth IRA?

5) You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA.

How Much Can I Withdraw from My Roth IRA?

6) Direct contributions to a Roth IRA (principal) may be withdrawn tax and penalty free at any time.
You are free to withdraw your contributions at any time. Even if you just opened your account last year or two years ago. No special forms needed. Just don't withdraw earnings. Then the tax man cometh.

Is There a Way I Can Withdraw Roth IRA Earnings Penalty Free?

7) If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them.
If you withdraw contributions and earnings typically you are taxed, but if you take them in the same year you contributed, then it's like the contributions never happened!

When Can I Withdraw All of My Money From My Roth IRA?

8) Generally, if you are under age 59½, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your Roth IRA. Distributions before you are age 59½ are called early distributions.

Are There Any Exceptions? What if I Want to Buy My First Home?

8b) You may not have to pay the 10% additional tax if you are in one of the following situations.

  • You have reached age 59½.
  • You are totally and permanently disabled.
  • You are the beneficiary of a deceased IRA owner.
  • You use the distribution to buy, build, or rebuild a first home.
  • The distributions are part of a series of substantially equal payments.
  • You have unreimbursed medical expenses that are more than 10% of your adjusted gross income (defined earlier) for the year.
  • You are paying medical insurance premiums during a period of unemployment.
  • The distributions are not more than your qualified higher education expenses.
  • The distribution is due to an IRS levy of the qualified plan.
  • The distribution is a qualified reservist distribution.

How Long Can I Keep My Roth Account?

9) You are not required to take distributions from your Roth IRA at any age.
Want to leave your money in the account? You can do that. This rule works pretty nicely when you purchase an investment property inside of a Roth IRA.

What Happens to My Individual Retirement Account When I Die?

10) A beneficiary can combine an inherited Roth IRA with another Roth IRA maintained by the beneficiary only if the beneficiary either inherited the other Roth IRA from the same decedent, or was the spouse of the decedent and the sole beneficiary of the Roth IRA and elects to treat it as his or her own IRA.

Married and your spouse passes away? You can combine both Roth IRA accounts into one for the surviving spouse. A Roth IRA can also be passed down to a child as an inheritance. Now that's how to begin building generational wealth.

And now you know the basics of the Roth IRA. Have you fallen in love yet?

Anything else you know or like about the Roth IRA?

This post is a part of a special Roth IRA series. See the other posts and videos by clicking over to The Ultimate Roth IRA Guide for Young Adults.

Originally posted 2014-08-13 06:30:43.

Categories
Investing

What is a Roth IRA and Why Do I Care?

Remember that time that Trace Adkins warned that little girl not to grow up too soon?

Don't remember? Let me catch you up.

As the song begins, there's a little girl that can't wait to turn 18 and get out of her mother's house. Then the hook comes with the warning. It goes a little like this.

She was staring out that window, of that SUV
Complaining, saying I can't wait to turn 18
She said I'll make my own money, and I'll make my own rules
Mamma put the car in park out there in front of the school
Then she kissed her head and said I was just like you

You're gonna miss this
You're gonna want this back
You're gonna wish these days hadn't gone by so fast
These are some good times
So take a good look around
You may not know it now
But you're gonna miss this

I have a similar warning, but it has nothing to do with popular country music.

If you don't take the time to figure out how a Roth IRA can benefit you, you're gonnna miss this chance for tax free money.

This one financial vehicle is often quoted as the best financial tool for young adults.

What is the Roth IRA?

IRA stands for Individual Retirement Arrangement, but the lettering is often used interchangeably with Individual Retirement Account or Individual Retirement Annuity because these are the two options for opening an IRA.

The Roth IRA was set up under tax law as a way for US citizens to save for retirement with tax benefits.

With the Roth IRA you have the ability to deposit funds today that have already been taxed.

Once you reach the age of eligibility to withdraw, as long as you satisfy the requirements, you do not pay taxes on withdrawals.

You can open a Roth IRA pretty easily with a bank, broker, insurance agent, or custodian licensed to accept retirement assets.

Remember that an IRA is an individual account. It cannot be opened as a joint account.

You can contribute to a Roth IRA within the Roth IRA rules and guidelines, which is covered in part two of this series.

Opening and contributing to a Roth IRA is one of the best ways to save for retirement and grow your assets.

Now that you know how to grow your assets, you can sing about your Roth IRA's honky tonk, badonkadonk.

My Roth IRA Helps Me Grow My Assets, Honky Tonk, and Badonkadonk | Young Finances

Information courtesy of Publication 590 via the Internal Revenue Service.

This post is a part of a special Roth IRA series. See the other posts and videos by clicking over to The Ultimate Roth IRA Guide for Young Adults.

Originally posted 2014-08-11 06:00:00.

Categories
Investing

How to Open a Roth IRA Online with Betterment and Celebrate Like a Boss

I've been a Betterment customer for a few months now.

I found Betterment to be a great way for a beginner to invest because they have low fees and they make the process of investing as simple as opening an account and depositing funds.

When you open a Betterment.com account, you will deposit or set up recurring deposits from a checking or savings account. Then the folks at Betterment will invest on your behalf into ETFs based on your portfolio allocation.

Portfolio allocation just means where you want your money to go.

There are two options, stocks and bonds. You don’t have to do any research or constant monitoring of your portfolio.

They manage your everything for you.

You simply have to decide whether you want a low risk portfolio or high return portfolio.

I learned that Betterment offers IRAs, both Roth and Traditional.

I was pretty excited to have a professionally managed retirement account so I opened my IRA with Betterment.

Here is my personal experience with opening my Betterment account.

 How to Open a Roth IRA with Betterment

The first thing that I noticed is that it's pretty easy to open an IRA. I have an existing account so I simply logged into my current account and started from there.

Here is a screen shot of my current account.

I started with a $250 deposit and I have contributed 25 dollars a month since opening my account in August.

It's important to make a habit of automatic contributions and I have an auto-deposit that comes out each month for Betterment and one auto-deposit that goes into an FDIC insured savings account.

Even if you can only start with a few hundred bucks, at least get started.

The automatic plan makes saving and investing easy.

Start with Betterment here

I've allocated 55% to stocks which is lower than my peers but my goal is to beat the returns of a typical bond fund.

An increase of 3% is fine for me.

Step 1) Choose a New Roth IRA Retirement Savings Goal

In order to open the IRA, you have to click to expand the 'total balance' section.

This will show your current goals and give you the option to start a new goal, retirement savings.

After you choose the option to create a new goal/IRA, you will have a chance to choose what type of IRA you would like to open.

If you are not sure if you want a Traditional or Roth IRA, click the 'Which type of IRA should I choose?' right above the IRA type selection.

As a registered investment advisor, Betterment can guide you through this choice.

Step 2) Choose Beneficiaries

After you select the type of IRA, you will be able to choose beneficiaries.

Not sure how to choose a beneficiary? Read this post on choosing a beneficiary.

Step 3) Fund Your New Roth IRA

Now you can choose how to fund your Roth IRA and celebrate!

That's it!

Pretty simple huh?

Time to celebrate!

[panel style="panel-primary" title="Click to Tweet This" footer=""]I just opened a Roth IRA so I can retire like a boss.[/panel]

Click here to open a Betterment account today.

Did you open your Betterment IRA yet? What are your retirement goals?

Originally posted 2014-08-08 05:00:27.

Categories
Investing

Choosing a Broker

Ready to put some real money in and start investing?

In that case you are going to need a broker. A stockbroker is an intermediary that buys and sells stocks and other securities. In the past, if you wanted to place a trade, you would have to call your broker and they would place the trade for you.

These days you can simply place trades online with an online stock broker. Now all you have to do is choose one.

Choosing a broker to trade online with can be easy if you know what you're looking for.

Do you trade often? Then you want a broker that allows you to trade for free or inexpensively.

Are you a hands-off investor? Then you may want to open an account with a broker that creates an optimized portfolio for you.

I choose to invest with more than one broker because I like some of the benefits of one broker and different benefits of another.

Here is a list of top brokerage firms:

Companies like Motif allow you to buy partial shares if you only have a little money to start with.

Make sure you pay attention to the ALL of the fees. Some brokers have fees to close an account and there may be account minimums so watch the fine print when opening your account. After you open your account be diligent about depositing your 10% savings consistently even if you are not ready to purchase a stock yet. It's all about getting in the habit.

Also your broker should be a registered member of FINRA and SIPC.

Curious to see how I invest? Click here for my portfolio.

One of my favorite movies is Wall Street and Charlie Sheen's character is a stockbroker that sells stock picks and aspires to be a financial success and a very wealthy stockbroker. The movie is brilliant and it can give you more of an idea of the stockbroker business.
Choosing a Broker | Young Finances
Happy trading!

Originally posted 2014-05-28 08:11:29.

Categories
Investing

Why Female Investors are Better Investors

This may surprise you if you did not already know, but studies have shown that female investors are typically better investors than males. Mostly, it has to do with the way we are wired and how we respond to events. Barclays Wealth and Ledbury Research are the authors of this study that explains why women are better investors. We are able to make more money in the market because we don’t take on as much risk.

 

Think about it, remember the kid in school that used to jump off the side of the playground wall? Or how about the little boy who always took any dare to eat random stuff? Does that sound smart to you? It’s pretty risky to eat the old bologna that’s been on the sidewalk for 2 summers but boys will do it because they like to take risks. Women are more likely to take calculated risks. Calculated is the key word. The study concludes that “Women were more likely than men to have a greater desire for self-control.” That makes sense to me.

So how can you use this to your advantage? Here are a few ways you can make money in the stock market by taking calculated risks.

Don’t Go All In

There’s a phrase called legging into a position. That just means that you don’t put everything on the table as soon as you’re ready to invest in a stock. The first thing you want to do is figure out what size position you plan to take. Is it going to be 20% of your portfolio, 10%? Then you break up your buying in chunks in order to take advantage of dollar cost averaging. That way you are getting an average cost as you move into the trade. Imagine how much better it would be if you leg into a trade if the market happens to dip the next day.

Stay Calm

Don’t worry about tiny market fluctuations or correction days. The market is going to ebb and flow just like the ocean. You realize this because you've lived with cycles since you were about 15. You know that down won’t be down for long and up won’t go on forever. So if you see a market dip take that opportunity to step back and reevaluate. Is the stock still a good solid stock? Then take this as an opportunity to buy in at a lower cost basis or just sit back and ride out the storm.

Use Your Emotions to Your Advantage

One of the strengths of women is that we use our heart and head to make decisions. It makes us better at seeing all sides of the argument. If you are panicky about your investments or you feel unsettled, think for a second. Is your intuition usually on point? Then take a second to really think about what has you unsettled. If it is just a fear in general that you can’t really put your finger on, try to take a rational approach and see what the issue is. If you’ve done that and you still have that gut feeling that something isn’t right, or that something is right, go with your gut. Especially if it has worked for you in the past.

What are your thoughts? Do you think women make better investors than men?

Photo via Flickr

Originally posted 2014-04-03 06:16:23.