4 Simple Steps to a Comfortable Retirement February 28

Filed under Retirement, Investing by Elizabeth | 0 comments

There is a great comment today over at Ramit’s blog. There is a bit of a debate going on about the current market and yesterday’s drop and whether this is the beginning of a recession. Check out comment number 7:

Index Funds.

Tax deferred accounts.

Automatic re-occurring investments into the fund(s).

Forget about it till you want to retire.

For a young person in a low tax bracket, this is the way to go. These are the 4 Steps to a comfortable retirement. That’s it. I’m going to repeat them again because I like them so much:

  1. Set up and invest in Index Funds
  2. Use Tax Deferred accounts
  3. Set up automatic (recurring) investments
  4. Leave it alone until you want to retire.

Granted, things can get a little more complicated than this as time goes on (for instance, when your salary increases you should increase the amount you invest). But, initially, this is all there is to it.

A Trick to Reaching Roth IRA Mutual Fund Minimums January 26

Filed under Taxes, Retirement by Elizabeth | 0 comments

Ever notice how high Roth IRA mutual fund minimums are? (And Mutual funds in general.) At Vanguard, most Roth IRA minimums are $3000; which is 75% of the maximum yearly contribution ($4000). Because of financial uncertainty, I chose not to max out through automatic contributions last year. Thus, I still have about $2000 that I can contribute to reach the $4000 max for 2006. I have this money in savings and am planning on contributing up to the max. But, I would also like to open a new fund so I can keep my savings diversified (my current Roth is an international fund, and I would also like to have an index fund that is more US focused).

The problem is that because Vanguard sets their minimums to $3000, I can’t couldn’t open a new fund in 2006 because legally I could only contribute $2000 more to a Roth for that year. But, between now and tax filing I can contribute for both 2006 and 2007. I called Vanguard just to check and they told me that when I open a new fund it will ask me to specify which year I want my contributions attributed to. So, I can contribute $2000 from 2006 and $1000 from 2007 and I will have reached the $3000 minimum without running into any tax issues. Genius!