Financial Idea's Blog

Some Financial Advisors Are Doing Well In Today’s Economy

Why is this? It’s because they have the presence of mind to step back and look at the big picture. Remember the chart in the last article (below) about saving money in an IRA for 50 years?

Look at the early years in that graph.

That was a test.

What are the early years? The first one, two, three? There’s hardly any difference between that and the start. “You mean I’ve been investing for three years with you now and I’ve hardly made anything? I’ll never get anywhere!”

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What Kind Of Money Should I Put Away Before 2010?

This is the kind of question that depends completely on you. By that I mean it depends on your goals and your needs. Let me explain a little more about what your options are. If you might need access to that money in the next few years, then you might not want to put it in an IRA or a company 401(k) where there’s a penalty to take it out before you’re age 59 ½. In that case, you’ll pick a regular taxable brokerage account for the money.

Or, maybe you know you’re okay with having it locked away until retirement (because you actually have a budget and you actually follow it), so the money is going into some sort of retirement savings plan, but which? The three most basic choices are a company 401(k) plan, a traditional IRA, and a Roth IRA and the decisions revolve around company matching funds, vesting schedules, investment choices and tax considerations.

In the case of a company 401(k), employees typically can save 15% of their gross income, up to $16,500 (in 2009). That money will be deducted from the gross income used to calculate how much tax you owe, and accordingly, a lower amount of tax will be withheld from your paycheck. You will eventually have to pay taxes on the money, but you can defer them until much later. The following chart shows just how wonderful that is.

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Technorati Tags: 401K, Compound interest calculator, Retirement, Roth IRA, rule of 72, traditional IRA, young investors