Being new to this whole blogging thing I entered the post on IRA's in a personal finance carnival being held on Monday. From what I understand the host blog reads through the submissions and chooses a few to post on their blog. The carnival is being held at Everyday Finance (http://everydayfinance.blogspot.com/) so go check it out (and wish me luck).
Tuesday, August 12, 2008
Quote
I forgot to supply a quote with my last post and I just came across this...
"The 19th century belonged to England, the 20th century belonged to the US, and the 21st century belongs to China. Invest accordingly.
-Warren Buffet at the Ben Graham Center for Value Investing
-Warren Buffet at the Ben Graham Center for Value Investing
Monday, August 11, 2008
The LD on IRA's
My deepest apologies for not making a legitimate post in the last few weeks. Last night I was at a bar with a few friends and the topic of IRA's came up. A friend of mine had just opened a traditional IRA and didn't know the difference between what he had opened and a Roth. There is a BIG difference...
IRA = Individual Retirement Account
Traditional IRA - A traditional IRA is like any other account you would open at a bank or brokerage that allows you to invest your money with the exception that it is earmarked for the individuals retirement. The largest and most important detail to know about the traditional IRA is that ALL deposits are made with PRE-TAX dollars. Thus, you can itemize your contributions to your traditional IRA and do not have to pay taxes on the contribution. HOWEVER, when you retire (after age 59.5) any withdrawals made from the account are taxed at the rate corresponding with your most recent income.
EXAMPLE - You graduate from college (age 22) and your salary is $30,000 thus falling into the 15% tax bracket. You contribute $4,000 a year with pretax dollars. When you decide to retire at age 62, your salary is now $100,000 placing you in the 28% tax bracket. You have accumulated approximately $350,000 in your traditional IRA and when you withdraw it, you will be taxed 28%-35% and your retirement nest egg will be squandered to $240,000 by the federal government. (In layman's terms: this sucks.)
Roth IRA - For the sake of simplicity, the Roth works exactly like a traditional IRA with the EXCEPTION OF HOW THE FUNDS ARE TAXED. With a Roth, you make contributions to the account with AFTER-TAX dollars. At retirement, you can withdraw the entire balance of the account TAX-FREE.
EXAMPLE - You graduate from college (age 22) and your salary is $30,000 thus falling into the 15% tax bracket. You contribute $4,000 a year with post-tax dollars (so about $3,400). When you decide to retire at age 62, your salary is now $100,000 placing you in the 28% tax bracket. You have accumulated approximately $300,000 in your traditional IRA and when you withdraw it, you will pay NO TAXES on the balance. The federal government has already taken their cut, but it was when you were paying about HALF THE TAXES. (In layman's terms: this is a beautiful thing.)
Retirement Funds with traditional IRA - $240,000
Retirement Funds with a Roth IRA - $300,000
Net Gain - $60,000
Keep in mind this is an extremely basic explanation. The lesson to extrapolate from this post is if you are younger than 30, and still have many years to reach your salary ceiling, a Roth IRA is a RIDICULOUSLY good opportunity. The example above remains very simple, the difference between the two accounts could potentially be more than $500,000 depending on your income.
IRA = Individual Retirement Account
Traditional IRA - A traditional IRA is like any other account you would open at a bank or brokerage that allows you to invest your money with the exception that it is earmarked for the individuals retirement. The largest and most important detail to know about the traditional IRA is that ALL deposits are made with PRE-TAX dollars. Thus, you can itemize your contributions to your traditional IRA and do not have to pay taxes on the contribution. HOWEVER, when you retire (after age 59.5) any withdrawals made from the account are taxed at the rate corresponding with your most recent income.
EXAMPLE - You graduate from college (age 22) and your salary is $30,000 thus falling into the 15% tax bracket. You contribute $4,000 a year with pretax dollars. When you decide to retire at age 62, your salary is now $100,000 placing you in the 28% tax bracket. You have accumulated approximately $350,000 in your traditional IRA and when you withdraw it, you will be taxed 28%-35% and your retirement nest egg will be squandered to $240,000 by the federal government. (In layman's terms: this sucks.)
Roth IRA - For the sake of simplicity, the Roth works exactly like a traditional IRA with the EXCEPTION OF HOW THE FUNDS ARE TAXED. With a Roth, you make contributions to the account with AFTER-TAX dollars. At retirement, you can withdraw the entire balance of the account TAX-FREE.
EXAMPLE - You graduate from college (age 22) and your salary is $30,000 thus falling into the 15% tax bracket. You contribute $4,000 a year with post-tax dollars (so about $3,400). When you decide to retire at age 62, your salary is now $100,000 placing you in the 28% tax bracket. You have accumulated approximately $300,000 in your traditional IRA and when you withdraw it, you will pay NO TAXES on the balance. The federal government has already taken their cut, but it was when you were paying about HALF THE TAXES. (In layman's terms: this is a beautiful thing.)
Retirement Funds with traditional IRA - $240,000
Retirement Funds with a Roth IRA - $300,000
Net Gain - $60,000
Keep in mind this is an extremely basic explanation. The lesson to extrapolate from this post is if you are younger than 30, and still have many years to reach your salary ceiling, a Roth IRA is a RIDICULOUSLY good opportunity. The example above remains very simple, the difference between the two accounts could potentially be more than $500,000 depending on your income.
Go to your bank. Go to your broker. Open a Roth IRA.
(and don't pay a yearly maintenance fee)
Wednesday, July 30, 2008
ASSETS
Bank of America Checking - $3,293.64
Bank of America Saving - $9.00
E*Trade Saving - $1
E*Trade Brokerage (Cash) - $11.08
E*Trade Brokerage (Portfolio) - $420.37
ShareBuilder Brokerage - $145.83
Alliant Credit Union Saving - $1,125.13
ING Orange Saving - $1
2004 Toyota Corolla Type S (Trade-In Value) - $7,900
Personal Belongings - $2,850
Total Assets - $15,756.41
LIABILITIES
Stafford Student Loan - $11,030.78
Total Liabilities - $11,030.78
August Net Worth: $4,725.63
July 19 Net Worth: $3,542.80
June 10 Net Worth: $2,206.81
May 2 Net Worth: $2,033.40
April 3 Net Worth: $290
Bank of America Checking - $3,293.64
Bank of America Saving - $9.00
E*Trade Saving - $1
E*Trade Brokerage (Cash) - $11.08
E*Trade Brokerage (Portfolio) - $420.37
ShareBuilder Brokerage - $145.83
Alliant Credit Union Saving - $1,125.13
ING Orange Saving - $1
2004 Toyota Corolla Type S (Trade-In Value) - $7,900
Personal Belongings - $2,850
Total Assets - $15,756.41
LIABILITIES
Stafford Student Loan - $11,030.78
Total Liabilities - $11,030.78
August Net Worth: $4,725.63
July 19 Net Worth: $3,542.80
June 10 Net Worth: $2,206.81
May 2 Net Worth: $2,033.40
April 3 Net Worth: $290
Sunday, July 6, 2008
July Net Worth Update
ASSETS
Bank of America Checking - $2,106.13
Bank of America Saving - $9.00
E*Trade Saving - $1
E*Trade Brokerage (Cash) - $11.08
E*Trade Brokerage (Portfolio) - $423.50
ShareBuilder Brokerage - $146.74
Alliant Credit Union Saving - $1,125.13
ING Orange Saving - $1
2004 Toyota Corolla Type S (Trade-In Value) - $7,900
Personal Belongings - $2,850
Total Assets - $14,573.58
LIABILITIES
Stafford Student Loan - $11,030.78
Total Liabilities - $11,030.78
July 19 Net Worth: $3,542.80
June 10 Net Worth: $2,206.81
May 2 Net Worth: $2,033.40
April 3 Net Worth: $290
Bank of America Checking - $2,106.13
Bank of America Saving - $9.00
E*Trade Saving - $1
E*Trade Brokerage (Cash) - $11.08
E*Trade Brokerage (Portfolio) - $423.50
ShareBuilder Brokerage - $146.74
Alliant Credit Union Saving - $1,125.13
ING Orange Saving - $1
2004 Toyota Corolla Type S (Trade-In Value) - $7,900
Personal Belongings - $2,850
Total Assets - $14,573.58
LIABILITIES
Stafford Student Loan - $11,030.78
Total Liabilities - $11,030.78
July 19 Net Worth: $3,542.80
June 10 Net Worth: $2,206.81
May 2 Net Worth: $2,033.40
April 3 Net Worth: $290
Tuesday, June 10, 2008
Net Worth Update
If I were to guess whether my net worth has increased or decreased since last month, I'd have to go with increase. No major bad things have happened, if anything I just came across a plethora of opportunites to gather up some extra cash.
ASSETS
Bank of America Checking - $437.15
Bank of America Saving - $398.95
E*Trade Saving - $0
E*Trade Brokerage (Cash) - $9.52
E*Trade Brokerage (Portfolio) - $477.98
ShareBuilder Brokerage - $146.23
Alliant Credit Union Saving - $1,116.76
ING Orange Saving - $1
2004 Toyota Corolla Type S (Trade-In Value) - $7,900
Personal Belongings - $2,750
Total Assets - $13,237.59
LIABILITIES
Stafford Student Loan - $11,030.78
Total Liabilities - $11,030.78
June 10 Net Worth: $2,206.81
May 2 Net Worth: $2,033.40
April 3 Net Worth: $290
April - June NET GAIN: $173.41
Good news I suppose, obviously more would be better. Unfortunately Notorious BIG was wrong because in my eyes, more money means less problems. The Personal Belongings category is obviously an estimattion, but I rccently began cleaning my room and uncovered what I like to call a heap of used textbooks that is worth at LEAST $250, and those are the only ones I've sold so far. Speaking of textbooks, it's pretty ridiculous to try to sell them back to the Textbook Annex at my school because they literally offer you chump change for something that someone somewhere put their heart and soul into. I came across Book Scouter (www.bookscouter.com) which is a PHENOMENAL website. You type in the ISBN number of the book and it gives you quotes from 30 different companies that buy books. Usually I choose one of the top three (pay attention to the consumer reviews) and compare that price to what I can get on Amazon Marketplace. The benefit of using Book Scouter is you don't have to compete with other sellers and wait around for someone to buy the book, and you also don't have some third party (Amazon) skimming a commission of the sale.
No song or quote today because, well, I'm just feeling that lazy. Lo Siento.
$$$ChangeForA20$$$
ASSETS
Bank of America Checking - $437.15
Bank of America Saving - $398.95
E*Trade Saving - $0
E*Trade Brokerage (Cash) - $9.52
E*Trade Brokerage (Portfolio) - $477.98
ShareBuilder Brokerage - $146.23
Alliant Credit Union Saving - $1,116.76
ING Orange Saving - $1
2004 Toyota Corolla Type S (Trade-In Value) - $7,900
Personal Belongings - $2,750
Total Assets - $13,237.59
LIABILITIES
Stafford Student Loan - $11,030.78
Total Liabilities - $11,030.78
June 10 Net Worth: $2,206.81
May 2 Net Worth: $2,033.40
April 3 Net Worth: $290
April - June NET GAIN: $173.41
Good news I suppose, obviously more would be better. Unfortunately Notorious BIG was wrong because in my eyes, more money means less problems. The Personal Belongings category is obviously an estimattion, but I rccently began cleaning my room and uncovered what I like to call a heap of used textbooks that is worth at LEAST $250, and those are the only ones I've sold so far. Speaking of textbooks, it's pretty ridiculous to try to sell them back to the Textbook Annex at my school because they literally offer you chump change for something that someone somewhere put their heart and soul into. I came across Book Scouter (www.bookscouter.com) which is a PHENOMENAL website. You type in the ISBN number of the book and it gives you quotes from 30 different companies that buy books. Usually I choose one of the top three (pay attention to the consumer reviews) and compare that price to what I can get on Amazon Marketplace. The benefit of using Book Scouter is you don't have to compete with other sellers and wait around for someone to buy the book, and you also don't have some third party (Amazon) skimming a commission of the sale.
No song or quote today because, well, I'm just feeling that lazy. Lo Siento.
$$$ChangeForA20$$$
Tuesday, May 6, 2008
A Bit More on Investing
Quote of the post: "Never spend your money before you have it."
-Thomas Jefferson
Song of the post: Brand New - Luca
It seems as though I can't get enough of the stock market. The first thing I do every morning is turn on CNBC (Literally open my eyes, roll over, hit the power button on the remote). The fact that everyday is different, and there is so much uncertainty makes it almost addicting. I always seem to find a new stock that I get wicked pumped about and want to buy but I obviously (and unfortunately) cannot buy as compulsively as I'd like.
I've got my eye on Merck (MRK). Merck has been around for quite awhile and makes some of the most commonly used drugs known. The price per share is almost half as it's 52 week high making it a phenomenal value buy. I did a few more in depth analyses but I feel like I need to explain what they are at some point before I just throw them out there. Not to mention Jim Cramer threw it out there on Mad Money a few weeks ago, his (good) reasoning being that recession or not, people are going to buy their shingles and cancer drugs. I like to think of Merck as a life-preserver in the healthcare sector which is something I've been avoiding at all costs.
Also, I came across a really sweet website (www.Mint.com). In addition to being my favorite color, Mint links ALL of your finances (checking, saving, brokerage, credit card) and creates personalized budgets. You can see where all of your money is going and helps you set benchmarks for certain items. Apparently I spen $228 on alcohol last month (probably par for the course for a college student) which really makes you think twice before you head to the bar for a pitcher or two when you're bored on a Sunday afternoon. Either way, check it out (it's free, obviously.)
And my favorite find of the week is SoGo Trade (www.sogotrade.com) who have dubbed themselves the 'Deepest Deep Discount Broker' and rightfully so. They charge $3.00 per trade!!! This beats Sharebuilder's $4 Tuesday trades plus there are no account minimums, and they give you 25 free trades, AND for more frequent traders you can pay $10 a month and get $1.50 trades. I have yet to find a single catch in all of this which leads me to believe this really is as good as it seems.
And I'll conclude with...vehicles are a liability in college, a big one. Parking tickets, speeding tickets, drunk driving, friends wanting to borrow it, getting towed, GAS, vandalism = a huge pain in the ass. I was towed for the 3rd (and final) time on Friday night and have now decided I am not using my car at all unless it is to drive home. So much for that +601%.
$$$Change for a 20$$$
-Thomas Jefferson
Song of the post: Brand New - Luca
It seems as though I can't get enough of the stock market. The first thing I do every morning is turn on CNBC (Literally open my eyes, roll over, hit the power button on the remote). The fact that everyday is different, and there is so much uncertainty makes it almost addicting. I always seem to find a new stock that I get wicked pumped about and want to buy but I obviously (and unfortunately) cannot buy as compulsively as I'd like.
I've got my eye on Merck (MRK). Merck has been around for quite awhile and makes some of the most commonly used drugs known. The price per share is almost half as it's 52 week high making it a phenomenal value buy. I did a few more in depth analyses but I feel like I need to explain what they are at some point before I just throw them out there. Not to mention Jim Cramer threw it out there on Mad Money a few weeks ago, his (good) reasoning being that recession or not, people are going to buy their shingles and cancer drugs. I like to think of Merck as a life-preserver in the healthcare sector which is something I've been avoiding at all costs.
Also, I came across a really sweet website (www.Mint.com). In addition to being my favorite color, Mint links ALL of your finances (checking, saving, brokerage, credit card) and creates personalized budgets. You can see where all of your money is going and helps you set benchmarks for certain items. Apparently I spen $228 on alcohol last month (probably par for the course for a college student) which really makes you think twice before you head to the bar for a pitcher or two when you're bored on a Sunday afternoon. Either way, check it out (it's free, obviously.)
And my favorite find of the week is SoGo Trade (www.sogotrade.com) who have dubbed themselves the 'Deepest Deep Discount Broker' and rightfully so. They charge $3.00 per trade!!! This beats Sharebuilder's $4 Tuesday trades plus there are no account minimums, and they give you 25 free trades, AND for more frequent traders you can pay $10 a month and get $1.50 trades. I have yet to find a single catch in all of this which leads me to believe this really is as good as it seems.
And I'll conclude with...vehicles are a liability in college, a big one. Parking tickets, speeding tickets, drunk driving, friends wanting to borrow it, getting towed, GAS, vandalism = a huge pain in the ass. I was towed for the 3rd (and final) time on Friday night and have now decided I am not using my car at all unless it is to drive home. So much for that +601%.
$$$Change for a 20$$$
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