Author Topic: Beginner Roth IRA Index Funds  (Read 3387 times)

cody1awesome

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Beginner Roth IRA Index Funds
« on: January 14, 2016, 08:45:18 AM »
Beginner here, looking for some answers.  Let's say I want to open a Roth IRA and invest in an index fund.  The buy in is $3000, and it says additional IRA is $100 dollars.  Does that mean that to buy in I have to start with 3 grand, then I can continue to buy at $100 increments until I hit the $5500 limit?  While I'm here, are there any other threads or resources I should check out to get a better idea of this stuff, specifically Roth IRA, that I should read up on?

dandarc

  • Magnum Stache
  • ******
  • Posts: 3979
  • Age: 37
Re: Beginner Roth IRA Index Funds
« Reply #1 on: January 14, 2016, 08:52:08 AM »
You might have it, but just to be clear - your initial purchase must be at least $3,000, and subsequent additions must be at least $100.

As far as additional reading - just be 100% sure that you want to go Roth rather than traditional, if a tIRA contributions would be deductible for you.

http://www.gocurrycracker.com/roth-sucks/

Also be aware of the saver's tax credit - at certain incomes, this can really skew the numbers in favor of traditional.

https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Savings-Contributions-Savers-Credit

nereo

  • Senior Mustachian
  • ********
  • Posts: 13368
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Beginner Roth IRA Index Funds
« Reply #2 on: January 14, 2016, 08:57:50 AM »
Beginner here, looking for some answers.  Let's say I want to open a Roth IRA and invest in an index fund.  The buy in is $3000, and it says additional IRA is $100 dollars.  Does that mean that to buy in I have to start with 3 grand, then I can continue to buy at $100 increments until I hit the $5500 limit?  While I'm here, are there any other threads or resources I should check out to get a better idea of this stuff, specifically Roth IRA, that I should read up on?

Your information is not accurate.
What the "mimimum" is depends on which brokerage you use (Vanguard, Fidelity, etc).  For Vanguard the minimum to buy some of their funds IRA is $1000 (e.g. their "target retirement funds" - which is a decent place to start). I know there are brokerages that require only $1000 or less to open an IRA.  The brokerage each also have their own rules on how small the minimum contributions can be.  I know Vanguard allows $25 contributions (and I *think* it can be as little as $10).

Going further, you don't even need to purchase a shares in an index fund.  Instead, you can buy ETFs or individual shares of companies.  For example, you could open an IRA account at ScottTrade or ING and buy individual shares of companies (paying the ~$7 trading fee).  Once you have a Vanguard account you can trade ETFs for free.

dandarc

  • Magnum Stache
  • ******
  • Posts: 3979
  • Age: 37
Re: Beginner Roth IRA Index Funds
« Reply #3 on: January 14, 2016, 09:02:09 AM »
+1 to nereo - those limits would be particular to the fund you invest in.

cody1awesome

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: Beginner Roth IRA Index Funds
« Reply #4 on: January 14, 2016, 09:03:23 AM »
Thank you!  This stuff can get confusing fast.  So after I buy in at 3 grand, I can continue adding 100 bucks at a time until I reach my $5500 limit?  Is that correct?  I'm self-employed and just bought a house a week ago, AND I have a 10 month old child.  I'm trying to keep everything within budget while still maxing out a retirement account.  I opened my account with Trade King in order to minimize fees.  They don't have an required amount to open, but the index fund I'm looking at has a specific buy in.

dandarc

  • Magnum Stache
  • ******
  • Posts: 3979
  • Age: 37
Re: Beginner Roth IRA Index Funds
« Reply #5 on: January 14, 2016, 09:09:04 AM »
Yeah you can do that.  Or you can put in $5500 today, or $3000 today then $500 a month until you hit $5500.

You can invest in Vanguard funds with no fees beyond the mutual fund expense ratio at Vanguard if you've got at least $1K to throw at it.  With all you've got going on, I'd want a set-it-and-forget thing, so no need to be trading stocks to be worried about commissions.

cody1awesome

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: Beginner Roth IRA Index Funds
« Reply #6 on: January 14, 2016, 09:14:14 AM »
Does it make more sense to put all of the money in early in the year or to do the initial investment and spread it out until I reach the max? 

dandarc

  • Magnum Stache
  • ******
  • Posts: 3979
  • Age: 37
Re: Beginner Roth IRA Index Funds
« Reply #7 on: January 14, 2016, 09:19:44 AM »
Suggested reading:

http://jlcollinsnh.com/stock-series/

On average, you'll do better by putting your money to work earlier, because over time, the market generally goes up.  Any given day, month, year can go down, but it is more likely to go up, so putting the dough in earlier is better.

One technical note - if you invest any money in an IRA before April 15th, be sure to count it towards your 2015 contribution limit - you can do that until your tax filing deadline.  So for that contribution, you'd want to look at your 2015 tax return to make your Roth vs. Traditional decision.

jim555

  • Handlebar Stache
  • *****
  • Posts: 2409
Re: Beginner Roth IRA Index Funds
« Reply #8 on: January 14, 2016, 09:24:25 AM »
The MyIRA is good to get you started, then go to a "real" fund once you get to the minimum $$$.

https://myra.gov/
 

cody1awesome

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: Beginner Roth IRA Index Funds
« Reply #9 on: January 14, 2016, 09:41:32 AM »
I saw the stock series just yesterday so I'll go through it at least once today.  Thanks for the myRA link as well, somehow I have never even heard of it!

nereo

  • Senior Mustachian
  • ********
  • Posts: 13368
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Beginner Roth IRA Index Funds
« Reply #10 on: January 14, 2016, 10:08:26 AM »

One technical note - if you invest any money in an IRA before April 15th, be sure to count it towards your 2015 contribution limit - you can do that until your tax filing deadline.  So for that contribution, you'd want to look at your 2015 tax return to make your Roth vs. Traditional decision.

This is a very good point.  If you opening up your IRA before April 15th, you can contribute to 2015 tax year.  Then once that is maxed out (or after April 15th) you can start contributing to your 2016 IRA.  Basically it's an extra $5500 you can contribute, and if you are doing a tIRA you can deduct that on your 2015 taxes.

+1 to the jlcollins stock series.  Required reading as far as I am concerned.  THankfully, it's easy to read and it's split up into easily digestible posts.