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Thread: Basic, Easy Financial Advice

  1. #1
    Moderator charlie61's Avatar
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    Default Basic, Easy Financial Advice

    Ladies, start an IRA account! You'd have to be insane not to. The financial advisor, Stuart, was saying that you need some $500,000 to retire, and he is correct! But this does not mean that you have to earn all of this money and stowe it away!

    I give you...

    Steps to Safe Investing

    1) Go to H&R Block (they are VERY nice there), and claim a small amount of your money on taxes, so it's safe to invest. Worried about background checks? Then claim as a cocktail waitress. Personally, I told them that I'm an independent contractor, I only work about once a month, and average around $300 per visit. I only make cash on a tip basis, so I have no W-2's, etc. (ha. ha. ha.) They love me there.

    2) Go to fidelity.com (a very user-friendly investing site), or a site of your choice.

    3) Find a Roth IRA, or 401K IRA that looks good to you, and arrange its maturity date to be around when you plan to retire.

    4) Put like $200 a month (or as much as you feel comfortable putting in, depending on how much you claim on taxes) into this account.

    5) IGNORE minute market fluctuations. The economy will get better (certainly before you retire), and your account will accrue interest. Just be disciplined, and don't withdraw your money when you feel like it. Let it sit. And rest easier knowing that you're planning for your future.

    Seriously. Take a few thousand bucks (that money is just laying around: why not put it to work for you??) and put it in an account. Only good can come of this.

    While you're at it, buy a few CD's. They're low risk, low profile, and again, merely put lazy money to work.

    Trust me, it's easy.

    Let me know if you have any questions. And feel free to add advice to this! I am not claiming to be a know-all on the subject by ANY means.

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    God/dess Bella21's Avatar
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    Default Re: Basic, Easy Financial Advice

    I have an IRA at fidelity that my dad started when I was a baby. I know nothing of these things... but my dad does and I have faith in his choices. You can set it up so that you just mail them a check when you want (there is a ceiling on how much you can send in per year). It's good to start putting away money as soon as possible.
    If you think school is hard, try being stupid.

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    Default Re: Basic, Easy Financial Advice

    ^^^ where conventional or SEP IRA's are concerned, I have a few reservations

    A - these IRA accounts are not tax free, they are tax DEFERRED. This means that you can reduce your taxable income ( and therefore tax burden) in 2008 by the amount that you contribute to an IRA. However, when you go to withdraw and spend this money in 2038, the withdrawn amount counts as taxable income in that year. Thus contributing to an IRA is a calculated risk that future income tax rates won't be higher than current income tax rates. Given that the so-called Social Security trust fund will need to start cashing in bonds after 2018 (meaning that general taxes will have to be increased to pay off these bonds, on top of regular income taxes, on top of SSI taxes), that calculated risk could be substantial.

    B - Given that the present six workers per retiree will decline to two workers per retire by 2038, it is extremely probable that future SSI and other gov't benefits will be subject to a 'means test'. In other words, instead of today's arrangement where every American rich or poor gets a SSI retirement check, in the future the gov't may stop sending checks to Americans who are able to afford their own retirement. One criteria for this 'means test' will be future income. Since the withdrawl of IRA money will count as income in 2038, it is entirely possible that the money you are contributing to an IRA in 2008 will cost you an equal amount of money in lost gov't benefits in 2038.

    There is one type of IRA called a Roth IRA which works differently. Contributions to a ROTH IRA do NOT save you money on your current year's tax liability because they do not reduce your current year's taxable income. However, withdrawls from a ROTH IRA in 2038 also do NOT count as 2038 income, are not subject to 2038 income taxes, and cannot be counted as income if the gov't applies a 'means test' in regard to your eligibility for 2038 SSI checks or other gov't benefits. However, interest earnings within a ROTH IRA are tax exempt the same as they are with a conventional IRA, which still offers a big advantage compared to taxable interest earnings from a CD for example.

    With either a conventional IRA or a ROTH IRA, the gov't has full documentation in regard to how much money is in these accounts annually, as well as how much additional money has been contributed. Also with both types of IRA's some penalties will be due for early withdrawl, but the ROTH penalties are much lower than the conventional IRA penalties since all of the contributed ROTH money has already been taxed. Also, for the moment at least, both conventional IRA money and ROTH IRA money are not subject to seizure as a result of bankruptcy proceedings - but this could change at any point in the future. Actually, any of the rules applying to conventional IRA's or ROTH IRA's could be changed at any point in the future - although in theory the after-tax nature of ROTH IRA contribution money limits the severity of any probable changes. And while this may not seem important in 2008, neither conventional IRA nor ROTH IRA money can be moved out of the country.

    The only obvious exception to this outlook regarding IRA's are employee 401k plans where the employer makes MATCHING CONTRIBUTIONS in proportion to the employee's contributions. From the employee's standpoint, the employer's matching contribution is 'free money' thus any such matching 401k plan should be maxxed out. However, independent contractors cannot take advantage of matching 401k plans without forming a C Corporation (which fills the role of the 'employer').
    Last edited by Melonie; 04-09-2008 at 09:36 AM.

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    Moderator charlie61's Avatar
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    Default Re: Basic, Easy Financial Advice

    ^^^^^^^^^^^^^^^^^^^^

    Rock on girl! You clearly know what you're talking about.


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    Default Re: Basic, Easy Financial Advice

    And to note the deadline for an IRA deposit for 2007 is April 15. Takes 5 minutes to open online traditional or Roth IRA account.

  6. #6
    Picaresque
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    Default Re: Basic, Easy Financial Advice

    Excellent advice! That is one of my goals for this year--open a Roth and put in the max yearly contribution.

    But I'm paranoid about putting all my confidence in one basket, so I want to start a little "nest egg" for retirement in my other country also.

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