Just getting started (Moved post)

[Guest kathye]

Wonder if anyone out there could offer me some good strong advice.....

I'm 50 yrs.old and want to start a Roth IRA and was wondering where to start one. I contribute $1200 per year to a flexible premium deferred annuity which is guaranteed at 3%. I know I should be more aggressive beings I have at least 10 more years to contribute. I want to contribute the maximum allowed. My husband is receiving retirement from the military and has a 401K at his current job. This would be a spousal Roth IRA and I want the best possible investment for the amount of time I have. Any suggestions would be grealy appreciated.

Kathy

[John G]

I moved your question to a new thread. It will get more attention here than on page 2 of something that has been running for a while.

First, you may be retiring in 10 years, but you are likely to be deploying your Roth in investments for a lot longer. You could easily live 20 to 40 years after you retire and your retirement assets must be invested to keep you ahead of inflation. On the day you retire, you don't want to go 100% to cash.

Because you are age 50, you can contribute $3,500 to your account and if your husband is at least 50, another $3,500 to his. Then in January you can make contributions for 2005. (assuming that you qualify for a Roth in both years)

No one can tell you the best investment for the next 20+ years. However, equities (aka stocks) have done very well over the long haul and it might be possible to average 10% annual returns. Investing 7k each year for the next ten years and getting a 10% return would build a Roth nest egg of about $110,000. Note, the maximum contributions will move higher so you might be able to achieve a better result.

You did not say anything about your academic education or investment experience, but I will assume from your question that you are a beginner investor too. To begin, you need both a custodian (who tracks your investment, choices include brokerages, banks, and mutual funds) and an investment (I suggest you use mutual funds). Not just any mutual fund but a NO LOAD fund that has an annual expense rate below 0.5%. There are perhaps 10,000 mutual funds, you initially only need one reasonable choice. Two catagories come to mind: some type of S&P500 or whole market index fund, or a general stock fund. NO LOAD means there is no front end or exit commission charged. You might also want to look for a custodian that has an annual fee that does not exceed $25... search on annual fee if you want to go further on that topic.

The "I'm new to Roths or investing" topic has come up a lot in the past. One feature of this site is that you can do a search and see previous related responses. For example, click on the ones below that addressed starting a Roth.

http://benefitslink.com/boards/index.php?s...5233&hl=started

http://benefitslink.com/boards/index.php?s...5411&hl=started

http://benefitslink.com/boards/index.php?s...4759&hl=started

http://benefitslink.com/boards/index.php?s...t=0entry77697

http://benefitslink.com/boards/index.php?showtopic=24759

http://benefitslink.com/boards/index.php?showtopic=22096

http://benefitslink.com/boards/index.php?showtopic=24151