Money Smarts

“Begin your Roth IRA as a College Student What is a Roth IRA? It is an individual retirement account (IRA) that has different advantages compared to a traditional IRA. The current maximum that a person under 50 years of age can invest per year is $5,000. This type of fund is invested into securities, mainly stocks or mutual funds.”

Begin your Roth IRA as a College Student
What is a Roth IRA? It is an individual retirement account (IRA) that has different advantages compared to a traditional IRA. The current maximum that a person under 50 years of age can invest per year is $5,000. This type of fund is invested into securities, mainly stocks or mutual funds. The money that you place into this type of account has already been taxed and the biggest advantage is the earnings and balance when taken out is tax-free, which sets this apart from any other retirement or investment vehicle.
As college students, the majority of us find it extremely difficult to have any money left over to save. Many Roth IRAs can be opened with a minimum of $1,000 and have a monthly distribution from your checking/savings account. I know that $1,000 seems daunting, but just imagine, $1,000 today with an average of an 8 percent return over 35 years, compounding one time annually could be worth around $14,785.
Think about that, if one could invest $1,000 and have it be worth close to $15,000 – wouldn’t you do it? To continue with the example, let’s say you invest $1,000 to begin and make $50 monthly deposits into the R IRA. Given the same figures plus the $50 monthly contribution, this amount in 35 years, compounded monthly at 8 percent would be worth $130,987, tax free!
Therefore, starting to save now will benefit you later. If you do not have the means to save and invest $1,000 to start, use your tax refund. If you can cut down your expenses and have the $50 to invest each month, the difference can be astronomical. Most companies allow automatic investing, so you don’t have to even worry about taking the time to deposit and invest your money. A few fund companies that offer a Roth IRA are Vanguard, T. Rowe Price, Fidelity, Charles Schwab and Wells Fargo. The company Web sites breakdown the advantages and process of starting a Roth IRA. What are you waiting for? Start the Roth IRA and watch your money grow tax-free!
For additional information regarding Roth IRAs, the Internet has a vast amount of information on many investment and financial Web sites.

Lanny Berlingieri is a current MBA finance student and holds a bachelor’s degree in Accounting from the University of Akron.
Berlingieri is involved in campus organizations Beta Alpha Psi, Accounting Association and Student Toastmaster.