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Start an IRA

Updated on December 10, 2015

Start your IRA!

Your retirement money is precious! Too many people do not take advantage of IRA’s available to them. Often people will put this task off. The time to start saving is today. If you start young and follow the plan you will have financial security when you are older.

Start with as little as $250 in a mutual fund. At the time of this writing the an account can be opened with the Hodges Fund symbol HDPMX which is a very fine fund as rated by many rating services.Another great fund which an investor can start with $250 is the Gabelli Asset Fund symbol GABAX. This is one of the most diversified funds around. This fund is up 5 percent per year over the last 10 at a time when the market is down over the same period. This is a fund which I keep a significant portion of my assets and am very satisfied with the results.This fund is up over 12 percent per year since 1986.

Decide which type of IRA is right for you. In a Roth IRA the investor invests money after taxes and any earnings on that money will be tax free for retirement. In a traditional IRA the money is invested before taxes. More simply put if you put money in a traditional IRA you can take the deduction on your tax return and you will pay fewer taxes. (Both federal and state). In a Roth IRA if you do not withdraw the money until after the age of 59 and on half you will never have to pay taxes on the earnings.

Another nice feature of the Roth IRA is you will not have to take a minimum distribution. A regular IRA requires minimum distributions upon reaching the age of seventy and one half.

There are income limits on IRA’s.

Roth: For 2015 the income limit is $116,000 for single, $183,000 for married.

Traditional: For 2015 the income limit (adjusted gross income) is $61,000 for single, $98,000 for married assuming you have a 401K or 403B available to you. If you are not covered by a plan at work your income can be much higher, the tax tables are quite complex. If you exceed these limits you can still contribute but you will need to contribute on an after tax basis.

Contribution limits are $5500 ($6500 for those 50 and older) per person. A married couple can each invests their full amount providing there was earned income. Earned income defined by most people as income from wages. Do not exceed the contribution limit.

Retire with income!

Don't retire broke.
Don't retire broke.

Find the right place to invest!

You will need to find an institution to start your IRA. This is where you will need to do a little homework. There are several considerations. How much do you have to invest? Very few mutual fund companies will accept $250 as those listed earlier in this article. Most require $2500. If you have only a few dollars perhaps you would like to investigate an IRA at your local credit union. Some credit unions will start an IRA with as few as $50 Once this figure has grown perhaps it is time to move it to a mutual fund company or brokerage firm.

Invest every pay period or monthly. With most institutions you can have automatic withdrawals set up from your checking or savings account. Perhaps you have a 401K. A nice option is to put a percentage of your overtime, extra commissions, profit sharing or bonus money into an IRA. Your money can really add up over time.

Good asset allocation and solid mutual fund selection are the keys to great returns on your investment. By choosing your investments wisely you can significantly increase your returns.

Develop your own asset allocation and invest in the best funds in those asset classes. Once the investor has their asset allocation select the best small cap, best mid cap, large cap, bond, and even concentrated portfolio funds for their portfolio.

Regardless if you are investing in your IRA, 401K, 403B or taxable account invest your money wisely. How you invest is equally as important as how much you invest.

If you have a job you have no excuse. Start saving today.

Have you contributed to your IRA?

Have you contributed to your IRA this year?

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