Investing?

[happymommy]

Dh no longer has 401k so we are on our own. I know nothing about investing. And to tell you the truth it scares the heck out of me.

I want to open a Roth IRA, where? what kind? Are the secure? Do I make one deposit a year etc......

Mutual Funds, Index Funds? Confused and they sound risky.

CD laddering, I think it's called, sounded good because I know what a cd is and it's simple.

o.k. I'm chicken any advice when you have to save for retirement on your own.

Thank you!

[Cricket1]

I would highly recommend putting money into an IRA--you can open one up at any bank or brokerage firm. The risk depends what you invest it in. Find a broker that you feel comfortable with and sit down and talk about it w/ him or her. When going w/ a broker find out about all fees and make sure they are reasonable. I THINK you can contribute up to $2,500/year for a roth--double check that as I'm not positive about that figure.

Mutual funds are a great investment vehicle, also. These offer a lot of diversification as opposed to investing in just one or two stocks (you're not putting all your eggs in one basket). With a brokerage firm, you can set up a certain amount to be invested each month or you can make deposits to purchase more funds as you can. Again, be aware of mutual fund fees.

The benefit to talking to a financial advisor is that you have someone to talk to. A lot of people do their own investing on line, which is great if you know what you're doing. If not, you could probably really use some advice.

[Telephus44]

I agree with starting with an IRA. What you invest in depends on your goals, but everyone's going to retire someday! Also, with an IRA you get a lot of tax benefit. I started mine just by asking my Dad what he would do, and he steered me to Vanguard (of course this was before the internet, so I had to mail in forms and checks then) but a LOT of places offer them, including banks. (Currently the max contribution for an IRA - ROTH or Traditional - is $4000/yr, will change to $5000/yr in 2008 - most places allow you to send money at any time, so you can send a check every month or one big one at the end of the year - some places will even set it up to have an automatic withdrawal from your paycheck or checking account)

When you open an IRA, you will have choices as to what to invest in based on where you open your IRA, similiar to the 401K you had - you probably had a choice of mutual funds you could invest in. You can hold a lot of different types of investments in an IRA (individual stocks, bonds, etc) but the most common choice (and the one I'd recommend) is mutual funds.

I think one of the best sites that does a good job explaining investments, IRAs, mutual funds, etc. is The Motley Fool - www.fool.com They operate their site under the premise that anyone can manage their own investments, you just need a little education and know-how. If you're not the kind of person that picks up information just by reading, it probably would really be helpful to visit a financial advisor. The one thing I would bear in mind with a financial advisor is that a lot of them get paid on commission for selling things (say, they get a commission on getting you to invest in this or that mutual fund) - so there is the potential for conflict of interest. Not all Financial Advisors work this way, but a lot of them do.

Also - congratulation for realizing that this is something you want to do! I find that for myself, I get a great deal of personal satisfaction knowing that I am completely in charge of my retirement and investments.

One last thought - since you said your husband no longer has a 401K - did you just cash it out? There are special tax considerations that you may be able to roll-over the money into a traditional IRA, unless you already have the money earmarked for something else.

[ironmaiden]

Hmmmm....

Definitely rollover that 401K into a TRADITIONAL IRA. Do NOT use the money for anything else. You'd have to pay tax penalties to do so - about 30%. - though I'm not sure about the rules on using it for a house downpayment.
I say traditional because to switch it to a Roth IRA you'd have to pay the taxes now.

Going forward, I'd do a Roth IRA with Vanguard. If you do not like managing your money or the fear of doing so would keep you from investing, pick a Target Retirement Fund. Based on your targeted retirement year (they round to the nearest 5 year), they rebalance the mix of stocks and bonds each year and as you get closer to retirement age, they make the balance more geared to bonds.

Laddering CDs - Basically, you take your money and buy CD's with varying maturity dates: Example: a 3 month, 6 month, 1 year. The longer the maturity the higher the interest rate. As each CD comes due, you take the money and buy a new one - this time for the longest rate. The idea is that you have a CD come due each year when you decide whether you need all or part of the money. This is not usually used for Retirement Savings though it could be.

[JustJoy]

When I left my corporate job I had to find a new home for my 401K earnings. Someone suggested Edward Jones. I've been with them for about 5 years now and they are doing a great job of investing my money.

[happymommy]

Thank you all so much for such generous replies with such helpful information.
Yes, I do know about the roll over....thank goodness.
I forgot about fool.com, thanks I'm going to start reading. I am scared a bit yet very excited to learn about investing for our retirement.

With appreciation, Happymommy
I'll let you know how I make out.