best retirement plan?

**paintedsky** · 02-01-2007, 11:11 AM

So I'm going to be getting my tax refund soon direct deposited next week just under 1,000. I turned 500 dollars into a CD already with ing (although I don't want to keep more than I think I would need in a CD just in case). I don't have a 401k because I don't plan to stay in my current job for much longer as I plan to go to college for a higher paying job and I know you lose all your money unless you are vested for 7 years or else you loose percentages off by the year. I figured my new field I'm heading into (nursing) would have pretty good benefits too.

I'm going on 22 and figured I could start saving at least a little bit now in an IRA. Along with my tax refund I'm also getting my profits sharing soon which is going to be about the same amount and figured I should sock some of it away before I'm tempted to spend it. I'm going for roth as I understand that one isn't taxed when you take it out but the traditional is taxed but not taxed while in the account. So is the roth taxed yearly while it's still in the account? What is the advantage of traditional?

So I'm wondering what everyone thinks is the best ira account to have? I'm thinking of just making one with ing direct since I already have savings and a cd there but I wanted to know if anyone knew of any other better options than ing. Thanks in advance.

**starsapphire** · 02-01-2007, 03:40 PM

Are you planning on working while in school? Or are you married? The reason I ask is because you can only fund IRA's with earned income, or have a spousal IRA (you may already know this, if so, my bad!)

**became4347** · 02-01-2007, 09:18 PM

I suggest you get "The Money Book for the Young Fabulous & Broke" by Suze Orman. From what you've written, I can tell you don't understand retirement accounts very well---401(k), Roth IRA vs. Traditional IRA.

Anyway, as for what you said about the 401(k), you are not going to lose all the money (if you had contributed). You always will keep the money YOU put in. The "vested" part refers to the company's match on your contribution. Also, typically vested schedules reach 100% at usually 3 years or so-not seven. (At my job, I was 100%vested from day one! Very rare) So I'm not sure about how long you've been at your current job, but not contributing to the 401(k) where an employer matches is throwing away free money. Even if you could have kept 50% of what your employer had matched for you all this time, that is free money- a bonus! But hindsight is 20/20.

As for the IRAs...a Roth IRA is funded by you with after tax dollars and it grows tax free! In other words, when you retire, you won't pay taxes on it when you make withdrawals. The traditional IRA is funded with pre-tax money but you pay taxes later in life when you withdraw from it. Honestly, from what you've written, I would suggest a Roth IRA and invest it in an index fund with a discount broker-not Ing. If it were me, the Roth is better because it grows tax-free and you can access the original contributions at any time without penalties unlike the traditional IRA. The details are too much to go into here. You really need to educate yourself a little bit about this stuff.

And starsapphire is right you need to have some earned income (or if your married you can open a IRA).

My biggest piece of advice to you is to slow down, put that money in a liquid account (ing savings) and spend some time learning about these retirement accounts. Never invest in something you don't understand.

PS-Congrats on the new nursing career! It takes a special person to be a nurse! It's a great career path!

**paintedsky** · 02-01-2007, 09:44 PM

I did plan to continue working while going to school but probably as a cna and not retail. And no, considering I work at a certain nameless retail company you only have complete vestings after 7 years. It's on a scale. You can only get into it after a whole year of working and first year into it you get zero vesting if you withdraw and the 3rd year you work is the only time you can even get a portion of the vesting so it doesn't seem worth it to me since I plan to leave the job shortly to get a job more related to what I plan to do. Thanks for the advice. I'll prob hold off on it longer then as I guess it's not too important now then.

**became4347** · 02-02-2007, 05:25 PM

I didn't mean to discourage you. Too bad about the 401(k) at your current work. But still try to learn about this stuff. It should be important to you. You are so so lucky because you are 21 years old and you have so much TIME to work with. I wish I had started investing for my retirement at your age-compounding, compounding! That's where you have such an advantage! Time to compound your money and make it really grow!

Please do learn about 401(k)s and IRAs. You can do it! If this new place you are going to work at does offer a 401(k) with a match, then please join it upto the match. All employers don't have such strict restrictions as your current employer. Like I said, most places will have you 100% vested in 3 years. And you will NEVER lose the contributions that YOU make. The vested part only refers to the money that they kick in for you. And you really should look into the benefits of a Roth IRA.

It's worth learning about. You are worth it. Don't give up on it! Try to find the book I mentioned at a library or from a friend. It is really good. Read financial websites and watch financial TV shows. Really soak it up. You can do it!