Life's Decisions
U need 2 start an IRA
Though retirement is years away—unless you play for the NFL—the time
to start saving for it is now. Yes, now—or preferably sooner. That's
because the earlier you begin, the longer your money has to sit and earn interest,
without you having to do a thing.
Why Start Now? Compounding!
You'd be surprised at what compounding interest can do. See how a $1,000
contribution can grow into as much as $17,449.*
| Years Invested |
4% |
6% |
8% |
10% |
| 10 |
$1,481 |
$1,791 |
$ 2,159 |
$ 2,994 |
| 20 |
$2,191 |
$3,207 |
$ 4,661 |
$ 6,728 |
| 30 |
$3,243 |
$5,743 |
$10,063 |
$17,449 |
*Rate of return on investment will depend on the type of
investment and market conditions over time.
One of the best ways to save is with an IRA. There are two main types: Traditional
and Roth.
Traditional IRAs
- Contributions may be 100% deductible.
- Earnings grow tax-deferred.
- Distributions are generally taxable, but penalty-free when you're at
least 591/2.
- Distributions must begin when the accountholder reaches age 70 1/2.
Roth IRAs
- Contributions are not tax-deductible.
- Earnings grow tax-free.
- Contributions can generally be distributed tax-free at any time.
- Earnings can be distributed tax-free if your initial contribution was made
at least five years prior and you're at least 59 1/2.
You're not required to begin receiving distributions at any age. Most
advisors recommend Roth IRAs for young adults. Can't wait 'till 59
1/2? You may be able to dip into your IRA early without penalty if you want
to use your cash for health insurance or medical bills, tuition, or to buy a
first home.
Contact the credit union for more on IRA options.
Other Types of Investments
In order to start your road to riches, you can deposit your cash into one of
the following products.
Club Accounts
You won't get a huge rate with these accounts, but you can use them to
save for big-budget expenses to avoid having to use credit. You deposit small
amounts in your account periodically and the funds are disbursed periodically.
Share Certificates
These accounts also use the penalty approach to try to get you to save, but
they almost always earn more than club accounts. The downside is you have to
leave your money in for a set term, and most require a minimum balance.
Money Market
Accounts
Sort of like a share certificate lite. You put your money in for a period of
time but are allowed a set number of penalty-free withdrawals. These accounts
are insured.
Mutual Funds
Just as the name suggests, these are clusters of various investments. They
include bonds, stock, equities, etc. Your gains are based on the fund's
performance, which could lead to a fortune, or financial loss. Some are sold
by brokers and require a management fee. Unlike the investments mentioned previously,
these are not insured.
Stock
Always in the news, these are shares of companies. If the stock price drops,
you lose money. However, if the price rises, you may earn a large amount of
cash. While higher rates of return are tempting, keep in mind that they are
not guaranteed, and you may have to pay a trader.
FYI: You should consider the stock market and mutual funds only after you have
made some safer investments. And remember these three words: diversify, diversify,
diversify.
Come to the credit union for advice on your investments
If you're unsure of what to do, you can come to the credit union. Our staff
can help you decide which accounts to open based
on your future financial goals. If you don't
have financial goals, don't worry; we can help
you develop them too. We provide access to financial
planners and discount
brokerage services.
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