Retirement: How do I save??

[~~Who,Me?~~]

Sorry another question here.

What exactly is a CD?

What exactly is an Ira?

Is it good to have them both? or is one better than the other? I have heard of them but never really knew much about them. And do you need to have a high initial investment for either one?

A CD stands for Certificate of Deposit. They are purchased with after tax dollars, and the % of interest varies (and goes up) with the amount of your investment. Invest less, the % rate will be less. Plunk down more $$, interest rate will be higher. They can vary in length from 6 months to 20 years, depends on how long you want your money tied up. Traditionally, these are less lucrative than other investments, but very safe.

An IRA is an individual retirement account. There are many, many different types of these. To narrow it down, look into a Roth IRA or Safe Harbor.

It is good to diversify, and at your age, this is on your side. So yes, it is good to have both, as well as whatever other investments you can afford. But don't feel pressure to get everything all at once. I'd pick one type of investment and start there.

Many banks are actually offering decent CDs right now. So maybe you want to start small--with a $500 or $1000 deposit in a CD, say for 2-3 years. Then when it matures, roll it into something else, such as an IRA. This will give you more time to do more research on what is best for you.

Cost matters! We pick Vanguard because they charge such a minimal % for their costs. Some charge as high as 2% of your investment! That's a lot, especially when you're talking about a million plus dollars. So if you do go with a person or an agency, make sure you know what they are charging you. It is intimidating and starting is the hardest part. But I would rather step out of my comfort zone and learn this stuff, than pay someone a few % of my retirement money. It's worth the effort. You can do this!

[kimandkathess]

Thanks for all the information. It is a little intimidating. I just know I want to do something safe. Im not into stocks and that kind of stuff and don't want to go down that route.
Has anyone hear of lendingclub . com?
I was doing some searches for the best interest baring account and came across them. They had a 9.6 or 9.7 % rate.
Now they do loans and investments. And said that people invest on the "notes" Now I didn't quite understand that part. They sated that someone could lose their investment if the people who had gotten loans through them didnt pay their loans. Now is this how all banks work? I am curious. They are an accredited BBB company so I really want to look into them with the interest rate they have, but that little bit of info I just told you about confused me.

[Critter66]

The lending club isn't a bank, so although the rates are good, there is signifiant risk. CD's and savings accounts (including IRA cd's & savings) at banks are insured to $250,000, meaning you won't loose anything up to that amount.

Just an FYI, to do an IRA, you need to have earned (from employment or self employment) income on your tax return. A self employed person can also do a SEP IRA, which is up to about 20% of your business net income reported on Schedule C.

[Bernman2]

Hi -
I'm not sure if you're still trying to figure out what to do, but I wanted to give you some information. One big thing in investing your money (which is what you are talking about) is that the less risk of an investment (read: safer), almost always you will have a less return. Meaning the safest things right now, CD's, Money market accounts, treasury bills, bonds, all pay very low interest (2-3% at most). The things you consider high risk, meaning less safe to you, are the ones that over time have a higher return (things like Stocks)

No matter what anyone tells you, there is no 'safe' risk-free investment that will return you anywhere near 10% per year. The only things that have done that consistently are stocks.

With that said, your questions are very typical of a person who is newly interested in growing their money for the future.

My best suggestion is to visit the sites talked about on here (Suze Orman, Dave Ramsey, etc) and other financial websites, and get yourself some basic books to become more informed.

I suggest starting with 'The Wealthy Barber', and 'The Richest Man in Babylon'. Both of these are very basic books, told in easy to understand terms, about the basics of taking care of your money, yourself and your family in regards to wealth growing. You will be surprised by a lot of things in the book - even experienced investors find out things they never thought about from these two specifically.

Start there - and learn as much as you can - and finally - don't let anyone else manage your own money, take your own accountability for it. Try to stay what is called 'diversified', meaning, don't put all your eggs in one basket. It's fine to have some money in the bank and/or CD's, but at your age you really need money in stocks, real estate (yes, at this point it is still going down but it won't go down forever), gold/silver, and yourself (you already have a business, one of the best ways possible in America to have the government take less from you).

Good luck!

[motherofmolly]

start slowly. when i got my first job that offered a retirement savings where i could put money into it. i started out with $25 a paycheck. i then upped it to $50 and then everytime we got a pay raise of some sorts, i put that raise into the account. i figured i wouldnt miss it that way. i did this with my dh too and he is now up to $300 a month...not much in the big picture, but it is better than nothing.

once i got use to the account we had, i opted in on them managing my money. the investment firm moves it around where they think it is doing the best. this has worked out as i am not that into stocks and the market and they are driven as the more i make the more their fee is.

dont look at the huge number. start slowly and work your way up. even if it is putting $50 a month into a savings account...and then once that gets to a bigger amount, moving it into a cd with a higher interest rate.

[queenofthehivemomof5]

As a self employed person myself (Julie and I) we went with a SEP IRA last year. I also have invested in some CD's and am just learning a bit more about the stock market. So far what I have learned so far is that the higher the risk the higher the interest rate and the lower the risk the lower the interest rate. I could be wrong but that is what I have observed. I like low risk myself because I don't fully understand the stock market stuff yet. But as I learn more the more willing I am to take a bigger risk. You have to learn that with the stock market you have to stick with it over the long haul. But I think you should defiantly have low risk and high risk investments.