Official Roth IRA contribution Thread...

[Rmsanger 10+ year member]

In case you haven't done so this year it is time to start thinking about putting something towards retirement...

Paying down debt, maxing out the 401k match, and maxing out your Roth IRA contributions are some of the most effective uses of extra cash. I try to "pay myself" each year during the holiday season once my gift shopping is complete.

Basics: Maximum contribution in 2007 is 4k and 5k in 2008. These are after-tax dollars to be invested in a tax free retirement account, which you can begin withdrawing at 59.5 without taxes or penalties. Some scenarios such as purchasing a home will allow you to withdraw a portion early though.

Attached are some helpful links about this investment method and my favorite fund groups:

http://en.wikipedia.org/wiki/Roth_IRA

http://www.getrichslowly.org/blog/2006/05/23/how-compound-interest-favors-the-young/

http://www.fool.com/school/basics/basics01.htm

http://www.fool.com/money/allaboutiras/allaboutiras.htm

http://www.kiplinger.com/columns/starting/archive/2006/st0309.htm

American Funds ~ I am in the New Perspective and EuroPacific Growth Funds

http://www.americanfunds.com/funds/returns/alphabetically.htm

Vanguard Funds ~ I am in Precious Metals and Mining Fund and Mid-Cap Growth Fund

https://personal.vanguard.com/VGApp/hnw/content/Funds/FundsVanguardFundsTarget2050Summary.jsp

https://personal.vanguard.com/VGApp/hnw/funds/vanguard/byname

Some quick pointers (Will go in more depth about fees, strategies, and long-term investing philosophies later when I have time):

1) Index Funds are inherently diversified amongst many asset classes and individual assets, hence there is a better risk/return ratio compared with randomly selecting individual assets for the average investor.

2) Risk tolerance - typically younger investors

3) Index vs. Actively Managed funds - Managed funds typically have higher fees and have statistically proven over time to produce lower risk adjusted returns than Index funds or Etfs. Try to limit the fees you pay annually as they rob you of growth.

4) Political risk vs. FX risk - Some funds are available for you to contribute $ and the assets are held within Foreign currencies. Other funds invest indirectly in foreign firms and political / economic risk of a particular region or country. Risk exposure to foreign currencies seems to be popular now with a weakening $ thus you want to have a percentage of your funds here.

5) Large Cap vs. Med Cap vs. Small Cap: Cap = Market Capitalization or Price Per share X # of Shares outstanding. Large Cap - Citi, GE, Exxon, BP are typically better as defensive plays and offer stronger returns through dividend yield in a stagnant or receding economy. Med Cap funds have been statistically proven to outperform Large Cap on a risk adjusted basis over time.

I'll spend some more time putting together my research over the next few weeks to make this thread more robust.

I expect that Flip and a few of the other resident finance experts can add value to this discussion as well! Happy Holidays...

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[Flipx99 5,000+ posts]

I would just like to remind everyone that an IRA year is 16 months. So if you are a big budgeter kind of person....a $4,000 per year amounts to $125 bi-weekly contribution.

Here are the funds I currently participate in:

AMERICAN CENTURY MID CAP VALUE INV (ACMVX

AMERICAN CENTURY LIFE SCIENCES INV (ALSIX)

BARON PARTNERS (BPTRX)

JANUS OVERSEAS (JAOSX)

JANUS CONTRARIAN (JSVAX)

VAN KAMPEN INTERNATIONAL GROWTH A (VIFAX)*

* -- I am stuck with this fund as it was transferred in. Since eTrade isn't a vendor, they can't sell it. So I am kinda stuck with it.

And here is my performance thus far:

YTD JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV

16.89% 1.12% -1.15% 0.73% 3.61% 4.32% -0.85% -1.47% -0.80% 6.61% 4.58% -2.22%

- Notice how poorly I did for the 1st quarter...doubling the S&P is about sticking to your strat.

-The majority of this portfolio will be rolled over by Jan. I feel the flight to quality may be over soon, and then it's time to get back into risk.

-Notice I don't hold any individual stocks in my retirement. Although I watch the market everyday, work out problems in the classroom everday, I still can't predict where a stock will be tomorrow or 6 months from now. But I do get a sense from Economic Indicators what sectors will do well.

-I'll stick with the Life Sciences fund as that is a 3 year play.

 

[Flipx99 5,000+ posts]

As for #4) The revaluation of the dollar may occur much faster than the depreciation. I may be hesitant about investing in firm denominated in foreign.

 

[Glock23 10+ year member]

Well crap I thought you were talking about my group. The Irish Republican Army..

 

[Ruthless Pastor 10+ year member]

Here's another thought too, if you are strapped for cash in December. You can make a Roth IRA contribution up until April 15, 2008 and have it count toward your 2007 tax return. It just has to be made before you file your taxes.

Also, for those CA.com'ers over 50, you can make an additional $1,000 "catch-up" contribution to make the totals $5,000 and $6,000 for 2007 and 2008, respectively.

 

[Flipx99 5,000+ posts]

Here's another thought too, if you are strapped for cash in December. You can make a Roth IRA contribution up until April 15, 2008 and have it count toward your 2007 tax return. It just has to be made before you file your taxes.
Also, for those CA.com'ers over 50, you can make an additional $1,000 "catch-up" contribution to make the totals $5,000 and $6,000 for 2007 and 2008, respectively.

That is what I meant by the IRA year is actually 16 months.

Good tip on the over 50s....I didn't know there was anyone that old on here, but they can share the info with family members that might be.

 

[snoopdan 5,000+ posts]

I wish I could get excited about financing //content.invisioncic.com/y282845/emoticons/crap.gif.7f4dd41e3e9b23fbd170a1ee6f65cecc.gif

 

[SocMunky 10+ year member]

Good advice, I may put a portion of my severance check into something like this, assuming I get re-employed soon enough.