Should a 16 yro get totally FREE IRA account at my local bank?
Hi,
I have a stable job and Im 16 I was planning to get a $1000 market account and some $500 CDs. I am a big SAVER I NEVER have to spend my money cause I worked hard for it.
My parents wont let me invest online nor would they let me open accounts at other institutions. Now im stuck at my local bank for now.
I know, I read and took a little dig in finding a little info about IRAs. Its insured by the FDIC up to $250,000 and it can only be open when one is 59 years old and its TAX FREE. Never pay taxs when you open and there is nifty fees to open when one reaches into their IRA prematurely.
1) So, here this brings to my question should I get a totally free IRA account that has no minimum balance at my bank?
2) Why should I get it I might die before I reach age 59?
3) Whats the whole purpose of invidual retirement accounts doesn’t it destroy the purpose of 401K’s, pensions, social security?
5) SHould I get the totally free IRA account at my local bank and why?
I am very impressed with your initiative at such a young age.
1) It depends if you want to save money for retirement.
2) You can withdraw the money (with penalties and taxes) before age 59. If you open a Roth IRA you can withdraw the amount you invested (not interest) penalty free and tax free.
3) IRAs are needed to supplement 401ks, pensions, and social security. Most people don’t get pensions. Social security is insolvent, so the government is going to have to make major changes, including pusing the benefit age back to 70 or more by the time you’re eligible.
IRAs are also great because you are not limited in what you can invest in. You can pick anything. A 401k requires that you invest in whatever your employer picks, and those choices are different for every employer, and some plans are horrible.
4) ???
5) No. You are very young. Your bank will only give you a small rate of return, like 3%. While you won’t lose the money you deposit in dollars, you will lose money in purchasing power through inflation. In 30 years, a gallon milk could cost $10 or a gallon of gasoline $12. You need to invest in stocks and bonds that will give you a better return.
I strongly encourage you to open a Roth IRA with Vanguard using their STAR Fund with $1000. That is a great investment choice that is well diversified in US and international stocks and bonds.
Know that this fund will go up and down, but over the long haul you are going to do very very well if you stick with it and keep saving.