Investing, Retirement 
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Go Open A Roth IRA Right Now!!!

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Do you have a Roth IRA? If so, excellent job, you’ve already done one of the best things you could probably do to ensure you have a financially viable retirement. If not, why not? If your excuse isn’t, I make more than $110,000 and thus am not allowed to contribute, then your excuse is not good enough.

Don’t have enough time? It takes literally fifteen minutes. Do it while you’re watching American Idol or CSI: Saturn. Fifteen minutes. You spend more time getting dressed in the morning. Go to Vanguard, or Fidelity, or TD Ameritrade, or Etrade or your favorite brokerage firm. (I even linked to the Open Account page to save you a few seconds)

Don’t have enough money? Did you know that if you contributed $4,000 (max for 2006 and 2007) right now and it appreciated at a mere 7% for the next twenty years, you would have $15,478.74? While that doesn’t sound like a lot of money, 7% is a relatively conservative number for your investments. If you were to instead use 11%, you’d have $32,249.25. If you were to stretch the time out thirty years at 11%, you’re talking $91,569.19 – all from a single $4,000 contribution right now.

Now, ignoring all those crazy appreciation numbers, remember that you don’t have to contribute all $4,000. You can contribute $1,000 or $100, but you need to contribute something. (I’d argue that you want to contribute as much as you can to avoid low balance fees but $1,000 is better than $0)

Afraid you’ll need the money? Since your Roth contributions are after-tax contributions, you can withdraw those contributions whenever you want. Dire emergency and you have no choice but to raid the Roth? You can still do it. You can still change your mind.

Opening a Roth IRA is ridiculously easy and it’s not something to be afraid of. Don’t be afraid you don’t have enough money and instead challenge yourself to find a way to save a hundred bucks a month and at the end of the year you’ll have $1,200 saved away (worth $27,470.76 in thirty years at 11%) that you didn’t think you had. You have until April 16th to file your taxes this year so you have until April 16th to open up a Roth IRA and contribute to it for 2006. Go! Do it!

{ 119 comments, please add your thoughts now! }

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119 Responses to “Go Open A Roth IRA Right Now!!!”

  1. Dan Coogan says:

    Thanks Jim,

    So it looks like I need to contact Etrade and have them convert my traditional IRA to a SEP-IRA. Hopefully they can help me with it and make it as painless and cost effective as possible. I’m self employeed like I said, but I’m the only employee — I hire freelance photo assistants per job if they are needed.

    Can I still put 4K into the Roth in addition to 25% of my earnings in the SEP-IRA?

  2. Dan Coogan says:

    I just spoke with Etrade (amazing, they answer the phone on Sunday AM) and the rep. says the limit is 4K per IRA – Traditional and Roth, so I have about $1900 left before I hit the total of 8K. If I’m close to that (and I hope to be) I’ll look at converting my Traditional IRA to a SEP-IRA.

    • jim says:

      Dan, Their limits are both 4k but you can contribute a total of 4k across the two, so if you put 2k in your Roth, you can only put 2k in your Traditional.

  3. Nashawn says:

    I am a college student. A baby really. 18 years old.
    I have been reading up on a lot of things money wise…and I wanted to know number one, am I too young to get an IRA?
    I have a job on campus now, and I have worked every summer before this so I had wanted to know.
    Also, is there any place that can explain to me in detail the IRA? I have the general idea but I think my knowledge is not where it needs to be.
    I want to save money for reitrement. I figure the time is now.

  4. Nashawn says:

    I just read a bit more, on Vanguard’s site. I know that I can start one because of the any age policy. But I only have $500 right now to put into anything. I feel like everywhere has minimum investments and I cannot start any Roth IRA without more money.
    Is there any possible way I can start a Roth IRA, or some type of retirement account or something that will help save and gain besides a savings account with only $500 to start?

    • jim says:

      It’s hard with only $500 because transaction fees and custodial fees alone will start eating into your funds very quickly unless you can plan on putting more money towards your Roth IRA as the months go on. You have until April 15th next year to contribute towards this year’s maximum so I would wait until you collect as much as you can before opening an account anywhere.

      The least you can have to open a Vanguard mutual fund account is $3,000 with their STAR fund. I’m going to write up an article on what I would do if I had $500 for a Roth, keep an eye out for it Nashawn.

  5. Joshua says:

    Actually, the Star Fund only takes $1000 to start up.

  6. Hug says:

    I have a Roth but don’t understand the fees that the company charges to handle it. It’s with Ameriprise. I never talk to the advisor and they charge for me to just have an account with them. Is that normal? Are there companies/websites that do it for free? The account has not made any extra money in the 7 seven years it’s been open, is that normal?

  7. Pete Lipowitz says:

    Hug, this isn’t normal to be at break even after 7 years. The fees Ameriprise charges have eaten into any return thus why you’re at even. Depending on how much you have, you should be able to find a free IRA. You’ll want to move it ASAP.

    See http://www.ameriprisesuck.com

  8. Joe Sorce says:

    I am 75 years old when I was working they only had ira accounts. I make about 50 to 55000 per year. I have about 130 000 in my ira account. what will it cost me to swich from an ira account to a roth account.

    Thank You

  9. confused says:

    Help!
    I want to open a Roth IRA account with Vanguard. I want to start with one for $5,000 for my wife and $5,000 for me. I’m 55 years old
    and won’t be retiring until I’m 62 or older. I’m not planning on touching the money but you never know if I’ll be needing it for an emergency. I don’t know what kind of IRA I should go for,
    I really don’t want to loose my money with a risky investment since I don’t have a lot of time to save (I wish I had started a lot younger!).
    I would appreciate any help from you experts in Roth IRA’s.
    Thanks a lot!

  10. sharon reynolds says:

    I am 57 and want to retire in 3 years. I am having the maximum taken out of my check till I retire. (20K annual I think) I also have some inheritance money sitting in a money market account which I am going to put in a CD. About 100K. I know very little about investing and am NOT a risk taker at all. Should I have a Roth Ira? Should I put some of this money I have into one?
    I also have an employer paid retirement plan. Help me please.
    Thanks

  11. Adam says:

    Quick Question…If I have a traditional IRA now and I want ot open up a Roth IRA as well, can I put $4k into each, or together I can only put in $4k?

    thanks in advance.

  12. jim says:

    Adam: You can’t put $4k into each, unfortunately it’s $4k total.

  13. Jaylen says:

    Can someone answer this question please?? I quit work last September, 2007 and moved to Nevada and haven’t gotten a job as of yet. My mother lost her husband, so I’ve been spending time with her.

    I just cashed out my 401k from my previous employer, about 50k. I realize the taxes and penalities, but needed the money to live on. I don’t have the check as of yet, and it will be made out to me.

    Question – Can I open a Roth IRA for 2008 even though I haven’t earned any money this year? Can it still be considered a type of roll over from earnings of my old job? I don’t want to open it for 2007 and 2008 because I want to avoid filing taxes in both my old state and Nevada IF they would make me. Can I reduce the 5k from my earnings next year at tax time and subtract the 5k from the 10% penalty?

    Thanks!!!! Nice website!

  14. Jaylen says:

    You can probably scratch that thing about filing taxes in Nevada….as there’s no state income tax.

    Which brings up the next question. If say I want to “roll over” 10k from my old 401k can I? With the Roth, I’d have to pay taxes on the full amount I received from the 401k I know on my 2008 tax return. But then I think I can deduct the 10k from my 10% penalty?

    Even though the check is made out to me, I think I have 60 days to do something with it right?

  15. Mark says:

    If you lose your job or switch jobs, you (depending on your company’s 401k policy) can either:

    a) leave your money in your existing 401k or
    b) Complete a roll over into a Traditional IRA and, from there you could…

    c) Convert your Traditional IRA into a Roth IRA, but you will have to pay taxes on the $10K. If you are in your 20s or 30s, that is a smart move.

    FYI, you can never roll over 401k money into a Roth IRA, only Traditional IRAs.

  16. Anonymous says:

    I’m a 25 year old grad student. I haven’t worked in a year to devote all my time to school, but have plenty of money saved up (10k) from my family and trust in a savings account. What should I do in order to put my money away for long term without filing taxes? Can i still open a roth ira and deposit the max for this past year and next year. I do have a w2 from 06-07 that i could file but i stopped working last spring before school started. If not whats the best thing to do with my money? Thanks in advance for all your help.

    Londyn

  17. Anonymous says:

    additionally, if i havent filed but worked in the last 3 years can i contribute based upon those unfiled earnings…?

    Londyn

  18. Jaylen says:

    Thanks for your answer Mark! I did a lot of research since I asked that question, and I did open a Roth IRA rollover with Vanguard. (The law changed in 2008 allowing you to rollover a 401K directly into a Roth.) I am in my early 40s but felt it best to take advantage of the low taxes now, rather than hate myself when I retire. Besides, I think I’ll really enjoy watching my money grow tax free. :D

    I only rolled over 9K of my 401K. I realize I will have to pay taxes on all the money that was orginally in my 401K and pay the 10% penalty on all the money less the 9K.

    Again, thanks for your response! It’s nice sites like this that get us moving….

  19. Faith says:

    I just found your website recently and I love it! Thanks for the info. I’m 36 years old and have been with my current job since I was 22. I have Teacher’s Retirement (TRS) with them since I started (they sign you up automatically with 100% matching contribution which is 6% of employee salary). Aside from the traditional 403b (TSA) and Deferred Compensation Plan 457(b), they are now offering Roth 403b which I think is awesome!!! Now that I’m debt free and have $2000 to save per month, I recently opened a Roth 403b (chose a top-rated mutual fund from Fidelity) and will religiously contribute $500 per pay (I get paid Bi-weekly). I also opened a Roth IRA with Fidelity and set up automatic withdrawal from my bank. I intend to max it. I’m also funding an emergency fund with a reputable online bank which is currently offering 4.05% APY (used to be 5.15%). I will try to save as much as I could. Nowadays, I get really excited with investing and looking forward to retiring comfortably. I promise myself that I will be more proactive with investing and more in control of my money. I hope I’m on the right track to a comfortable retirement.

  20. cynthia bailey says:

    I am 52, ex and I put all our retirement into a home that he lost after the split. I am having to start from square one, new location, new job, that offered nothing….and thats where I sit today, Im scared to death and dont know what to do.

  21. No Debt Plan says:

    We recently did it, and fully funded one as well. It really is the easy, at least with Vanguard.

  22. Singh says:

    Jim your responses to the questions were very explain, i have a question, once you get a Roth IRA account open, what do you think is the best thing to invest in, STOCKs ? Mutual Funds ? CDs ??

  23. jim says:

    John Bogle, of Vanguard fame, recommends index funds, I agree with him. :)

  24. amimn says:

    I tried to open a Roth IRA with Scottrade, but was denied based on my credit score. What does this have to do with trying to save?
    I earn 57k yr. credit score lowered due to running from a bad marriage. Working on rebuilding my life!
    Any other co that opens regardless of score?

  25. Jaylen says:

    ^^^^^^^

    I’ve never heard anything so crazy! Who wouldn’t want to take your money? When I opened my Roth with Vanguard, it was extremely easy, and I’m almost certain they didn’t run a credit check.

    Go somewhere else!! Good luck!

    p.s. If I’m wrong about a credit check then sorry….but how dumb would that be? Half of America wouldn’t be able to save for retirement if a high FICO score determined their participation ability.


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