I'm 21, have a SMALL templeton fund, and need guidance...

[Guest Nanotech9]

I recently heard about the ROTH IRA deal... I know just about nothing about them, except that it would seem a bit better than my currenc templeton fund wich, over the last 6 or 8 years has done Nothing, or even lessend in value.

currently i have about $1500 in that, and woulbe able to throw in another $500 for somehthing that was a bit more promising.

I understand that a Roth IRA is a LONG-term investment, which is why at teh present time i couldnt throw in more than $2k.

Also, there seems to be so many different things to read...

If someone could point me two one or two good sites or articles that sum up ROT IRA and anything associated with it, i'de appreciate it.

If anyone has any suggestions heres a few more details:

I'm 21.

$1500 in Templeton Growth fund

I own my car and bike.

I rent a small apartment.

I NEVER carry a balance on my credit cards.

I've got about $300 left over every month after bills etc, but that usually goes to upgrading my car or bike (weekend hobby - i autocross my car)... some of which COULD be re-directed into a savings fund of some sort.

about $6k in a Money Market account through my bank - not making much interest (3%?) but its there because ONE day (soon hopefully) i'm planning on using it to go back to school. Therefore, it needs to be accessible w/o penalities.

I'm open to suggestions of any kind, including getting into owning rental property etc.

Thanks!

Eric

[Guest LKHartnett]

It sounds like you are looking to have a discussion with your financial advisor.

If Templeton says you can only invest in "these kind of funds" if you have a Roth, and "those kinds of funds" if you have a traditional IRA, and you aren't happy with the performance of what's available, you might want to consider finding a different place to be putting your investments, not a different kind of IRA.

Remember, the Roth was really put into place for those who were setting aside money for retirement, but might wish to use the money for the purchase of their first home, or to pay college tuition later on . . . It's been a while since I've looked at the Roth, but as I recall, after five years in the Roth you may withdraw for those specific events without penalty if you are under age 59 1/2. (Typically, a withdrawal from an IRA prior to age 59 1/2 triggers a 10% penalty). A straight IRA says "no withdrawal before 59 1/2 . . . or else . . . period."

IRAs are really out there to permit the average Joe a mechanism for setting aside for retirement and deferring taxes on the earnings. So, if your concern is whether or not your investments are performing up to your standards, find a new place to put your money. Perhaps, rather than going with a fund family, you may wish to find a financial advisor who will provide you with a variety of investment options . . . including looking into your bigger picture financial issues. It sounds like IRAs are not your only concern.

[John G]

I doubt that you have a financial advisor, so I will assume that role for the next three minutes and type fast. No charge!

Thanks for the background info. No credit card debt is good. I assume by what you say you have no car payment which would also be good. The 6K is a good start on "reserves" but it needs to be bigger, so that is something to start doing now. I assume that you work, but info on what type of job and how far you have persued education would be helpful since there is a big diff from just HS to already have the BA.... Getting a solid education will help you increase your income and should be a very high priority. I would not wait until you have saved more money, college loans, work study, scholarships are all options you should investigate.

I am a little surprised that your Templeton investment is flat or down after 6-8 years. The last three years have been very negative for almost all investments. Prior to that you had almost a complete decade of great years. So goes the stock market... up and down... with a long term trend towards up.

A Roth IRA is indeed intended to be a long term investment account. If you have "earned income" (a paycheck) then you should qualify for a Roth. You may want to consider starting one with a regular deposit from your checking account. For example, you might be able to tolerate $100 per month. I would suggest a broad based mutual fund, perhaps an S&P500 index fund. You might also sell your Templeton fund and start with the proceeds, if the fund has not grown much you may even have previously paid capital gains that will translate into a tax loss in the year you sell. Templeton should be able to explain this to you. You should be looking for a NO LOAD fund that has either no or a small (under $20) annual IRA fee.

One good article: try the March issue of Consumer Reports which each year has some laypersons articles on mutual funds and retirement accounts.

Age 21 ! Congrats on thinking ahead. You may want to subscribe to Kiplinger Financial mag which does a great job for people in their 20s covering investment basics, credit, insurance, and other basic financial issues.

Time is up. Good luck. Post again if you have other questions.