Friday, May 17, 2013

Messages From Readers: Questions About IRAs

Questions?

A reader sent in a couple questions regarding a comment I left earlier, found here: http://orphanreceptors.blogspot.com/2013/05/retirement-funds-i-dont-care-if-youre.html

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"Sorry Joan, but can you reexplain this "4) You can only contribute the money you earned in 2012 until April 15th of 2013. (So you always have until April 15th of the following year to contribute the full amount of the current year). " I didn't quite follow it completely.

Also, could you do a post on IRAs in general and retirement plans too? I don't know too much about them.

Also, for Roths, is it like a mutual fund then? It sounds similar - pool your and other people's monies together, invest in stuff, and return the gained worth. Isn't there a chance of the investments going bad and me losing some of my retirement money though? (I'm not well read on this, so not sure...)

By the way, is there a minimum amount I have to invest to open/continue the account? And do I have to invest a certain amount every year?" 

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1) Let's say you make $5000 in the year 2012, and the maximum contribution you can make to a Roth is $5000 a year. For some reason, when December 31, 2012 rolls around, you only have $4800 dollars to contribute to your Roth. You have until April 15, 2013 to contribute another $200 dollars and put it in the account. 

2) Sure, I'll get into more specifics about what people do with Roths later. 

3) Think of a Roth like a bank account with some of your money in it. The money can be invested through stocks, mutual funds, etc., but it all qualifies as "retirement savings." Retirement savings have special benefits, which I cover in multiple posts/comments on the blog. 

4) When you open a Roth with a company (let's call it Company A), the company decides what the minimum deposit is. After that, it doesn't matter how much you put in, but I suggest maxing it out. You do not have to invest a certain amount a year, but there is a limit on how much you can invest per year. 

Hope that helps!

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Photo credit: Leo Reynolds via photopin cc

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