Retirement savings suggestions?

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Here are the facts:

1. My employer does not offer any type of 401K plan
2. I don't want to depend on social security for my retirement
3. I want to earn more than 4,5-5% that I'm earning in a typical savings account
4. I want the investement to be relatively liquid - something that I can take out at any time (not at retirement age) without being punished for early withdrawal, in case I leave the US (I'm not a permanent resident) at any point in time.
5. I'm 32 and single.

After speaking with an Ameriprise Financial advisor, he recommends I invest in their asset allocation fund. However, they take 5.75% of every $1 that I invest. That is the upfront cost of putting my money into it. Not having much experience in this type of investing, I am really not sure if that's reasonable and if it's a wise move.

What would you suggest in my situation? Where should I put my money? I am generally very risk averse, but by doing so, I may be passing on some larger interest income potential.

At the same time, I am putting some of the money away into savings because I hope to buy a house within a year or two, so I will need that for down payment. But aside from that, I still want to start saving for retirement.
 
Just open a money market account. Right now the benchmark is about 5%.

Saving for a house and saving for retirement are very separate things and should be treated as such.

Sounds like IRA's are out, you want rapid liquidity - and to me it makes zero sense to save for retirement without at least allowing the money to grow tax deferred, or better tax free.

bag the Ameriprise thing - those guys are professional rip-off artists. Once you have your money market going, start thinking about an account with a low cost company like Vanguard or Fidelity. Both have a great selection of funds. Fidelity allows you to buy any fund or ETF out there - some have total fees under 0.10%. It will take a little investment in time at the library and web, but well worth it. 5.75% front load!!! Sheesh!! (Plus they have build in fees over 1%!!!)
 
Agree, steer clear of that adviser. Also stay away from insurance company's. Like mentioned many of the online electronic banks are paying 5% on a pure savings and checking account. Have some liquid money laddered in short term CD's paying well over 5%. Call around to the local small savings and loan banks, one always seems to have some special CD rate to hook customers. I just do this each time one of the cd's mature. Always find better rates this way than I can search online or at my bank.
 
Well, 4.5% is what i'm pulling right now from the ING Direct savings account. Their CDs are 5.1%. But I was hoping for a return about twice that on my retirement account. Aren't there any vehicles out there that deliver this kind of interest? It doesn't have to be super-liquid. I'm OK with putting it away for say 10 years.

5% doesn't sound like much. That's barely keeping up with inflation.

That Ameriprise fund is expected to deliver 10-12%, alas, no one will guarantee that it actually will.
 
Pablo and wiley are right on target. Forget the 5.75% load. Most of my money is in Vanguard. Check their web site. Pick a fund you like. You can go safe or risky. They have everything from safe CDs to risky funds. Shoot some money over there. That's enough to get you started and get used to the nuts and bolts of investing.

At 32 years of age, investing is wide open to you. Unless you absolutely cannot afford to take the chance of losing some of your money, you should seriously consider some of the traditional growth and income funds.

I've been in it for 10 years. Even though we've had some bad years, I've been doing okay.
 
Also, I noticed ING offers retirement accounts:
http://home.ingdirect.com/products/products.asp?s=IRAOverview

If I were to go into those IRAs, I understand I would be penalized for early withdrawals.

How do I decide if IRA or Roth IRA would be better for me?

Also, if I haven't filed my taxes for 2006 yet, can I make a $4000 contribution to IRA and thus reduce my tax liability (I owe the government about $600 this year)?

Do you know any good sites where I could learn about retirement planning? I am so lost in all this stuff...
 
Well, you have 2 goals here. Save short term money for a house. Some sort of retirement plan.

For short term savings, a money market or CD is the simplest. Check out any local Credit Unions. Sometimes they have great deals for new customers. I use the North Carolina State Credit Union. Best customer service I've ever had. Much better then any of the local banks, and no junk fees. There may be a similar one near you. Ask around.

For retirement savings, and given your residence status, a Roth IRA may be the best way to go. It can be setup with payroll deduction, which makes it about as painless as possible.

Here is a bunch of info to check out.

Lots of good IRA info here.
Fidelity
Vanguard
TIAA-CREF

Going with an investment house, allows you to manage your account from anywhere in the world via the internet.

Hope this helps some...
coffee.gif
 
Spend some time talking with a Fee only advisor.

I would set up a diversified mutual fund stock portfolio with Growth, Growth and income, Small Cap and overseas/foreign funds.

You should be able to average 12% or so over the long term. Last year was an 18% year for me, so even if I don't do 6% this year I would have more than made up for it from last year.

Here is a good site:
http://www.napfa.org/
 
Put as much as you can into a Roth IRA (there is an annual limit, I think $4000). You can take out all you put in without penalty anytime. Penalty only applies to the earnings. Since you fund a Roth with after tax money, there is no tax on the withdrawals, either withdrawal of what you put in or when you reach the age where you can withdraw the earnings. Right now you can still do a 2006 Roth contribution I think until April 15. Nothing to enter on your tax return for the contribution since it is after tax money.

Oakmark has a number of excellent mutual funds and is available fee-free through fund supermarket companies like Schwab and Fidelity.

One excellent fund company (but not available fee-free from a fund supermarket company) is Tweedy Browne.
 
Add T. Row Price to the list of low cost investment firms.
If you want liquidity, a money management account is the only way to go.
Check around; some are advertising 4.5-5%. Check on line firms too, some are paying better than local.
IRA and Roth are one way accounts unless you want to pay heavy fines for withdrawals.(before 59½).
 
Pete,

First off, as others have said, stay away from the Ameriprise fellow; he is charging way too much. You can probably achieive your goals with Vanguards Balanced index fund for retirement and a money market fund or CD's for the house. You also may want to read a basic investing book or speak to a fee only planner. Although people in the industry want you to think money matters are complex, one can keep things pretty simple and do very well on their own with just a little knowledge.

frank
 
Quote:


IRA and Roth are one way accounts unless you want to pay heavy fines for withdrawals.(before 59½).


I repeat, there are no fines for withdrawing the money you put into a Roth IRA. For example, I put $6000 into a Roth over two years. Later when it was worth $6600, I needed the money and pulled it out. I only paid fines on the $600 and could have avoided that if I had left that $600 in the Roth.
 
Quote:


Quote:


IRA and Roth are one way accounts unless you want to pay heavy fines for withdrawals.(before 59½).


I repeat, there are no fines for withdrawing the money you put into a Roth IRA. For example, I put $6000 into a Roth over two years. Later when it was worth $6600, I needed the money and pulled it out. I only paid fines on the $600 and could have avoided that if I had left that $600 in the Roth.




This is absolutely correct.

You can withdrawl the principle at any time with no penelty, only the growth is where you would pay a penalty.

Good luck,
 
I should add that also had to pay taxes on that $600 growth. If I had waited until the appropriate age (what is it 59?, can't remember) I would have had neither taxes or penalty.

Isn't there an exemption for withdrawal from an IRA for first time home buyers? Was it with Roth or what type IRA?
 
Correctamundo Paul. One item of note is the IRS has exceptions to the early withdrawal penalty of 10%, one of them being up to $10,000 maximum lifetime to purchase a first home. So Pete, if you have never owned a home, a Roth could be a win-win for both a down-payment on a home and retirement.

Another good easy option is life-cycle funds like Fidelity's freedom funds. They start out mostly in riskier investments where the growth is, and then reallocate to a very conservative mix as you get older to lock in your earnings. Unfortunately Fidelity charges fees on their freedom funds in addition to the fees the individual funds that are in the freedom fund charge. T-Rowe prices life cycle funds don't and have done better over the past couple years in growth.
 
Most the big funds have SO MUCH money in them the assets are spread widely over the market. It's so much money the managers can't be real aggressive in trading up it's value up without upsetting the price of the stocks involved. The result is the funds pretty much move with the index's. Most fund managers are unable to outperform the index funds, or at least MOST don't. The % move if you don't know anything about the markets is to stay with no-load index funds.
 
Thanks for all the info so far.

As far as Roth IRA, I also have to specify how that money will be invested. Let's say for example, that I want to invest the money that goes into Roth IRA in T-Rowe Price's Retirement 2035 Fund, but I want to invest more than the $4000/year that Roth IRA allows. How do I do that? Do I need to open two different accounts then, even if both of them will be invested in the same Retirement 2035 Fund? Or will everything above $4000/year sit in the same account except that the earnings from the amount above $4000 will not be tax-free?
 
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