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Question for the Money Doctors

Question submitted on Jul 21, 2012.


I''m 18 and worried about retirement. Being at the stage of life I''m in, a steady income is unreliable. I have some savings set aside, and really want to get started. Where do I start?


One of the most efficient methods of saving for retirement, particularly for someone as young as you are, is with a Roth IRA.  You may contribute up to $5,000 in 2012, assuming that you have at least $5,000 of earned income.  Although contributions are not deductible, the growth from interest, dividends, capital gains, or price appreciation, may be free from federal income tax when you withdraw money from the account.  Additionally there is no required minimum distribution with respect to Roth IRAs.  The real value is in the tax free compounding for fifty or more years at your age.  For instance, a one time deposit today of $5,000 that grows at a rate of 10% over the next fifty years would become over $700,000.  If you do this each year for the next ten years with that type of return, your investment could grow to almost $5,000,000 over the fifty year time period.

While you might not earn 10% over the long term, you can see that the advantage of contributing at an early age. 

There are several financial planning calculators on the website that might be helpful in doing your own calculations. 

Talk with your CPA or financial advisor ( for informaiton on the best places to invest your savings.  So good luck, but get started sooner rather than later.

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