Planning to take some action

[alleniverson]

Hi, I'm new to this forum and was looking for advice on what I should do.

I'm currently a college student and I've been wanting to start investing for quite a while now. Unfortunately, I haven't done much and my words outspeak my actions. I've been following the stock market a bit but I'm never sure on what to do. I've recently been looking at mutual funds (which is much safer, correct me if I'm wrong) with one being T. Rowe Price Retirement 2050 and 2055. Oh, for those wondering my age, I'm 18.

So far, the only thing I have done is open a CD for $1,000 at 5.2% last December (which I assume is a pretty high rate). I get $500 a month from my parents as spending money but that has mostly gone towards my tuition but I don't have many expenses going out this month so I plan on saving a majority of it. I also got a part time job this month so that should bring me around an extra $300 a month. I have a credit card but I have no debt and almost never use it.

Starting from May, this is what I plan to do:
Open an ING Direct savings account and deposit $100 monthly
Open a Roth IRA with T. Rowe Price Retirement 2050 or 2055 (would appreciate it if someone helped me choose there) and deposit $100 monthly
Open WaMu checking + savings account and deposit $400 first month and $100 thereafter (minimum for savings is $300 and I would just stick $100 into checkings in order to link the account so I could get the 3.30% interest rate)

I would greatly appreciate it if someone pointed me towards the right direction and corrected me because I am a beginner at this entire thing. Thank you in advance. Oh and I apologize if this post is too lengthy.

[ScrimpAndSave]

You have your priorities set straight! Nice work!

[noppenbd]

Originally Posted by alleniverson

Open a Roth IRA with T. Rowe Price Retirement 2050 or 2055 (would appreciate it if someone helped me choose there) and deposit $100 monthly.

You have a great plan! Stick to it and you will be in great shape later in life. The TRP Retirement mutual funds are actually "funds of funds", where you actually own a variety of funds with a single share of the umbrella fund (several other companies also offer similar retirement funds). This gives you an advantage of being automatically diversified with a minimum of complexity. The other advantage to these funds is that they adjust your diversification as you advance towards retirement. When retirement is far off (20+ years) you still want to be diversified, but with a bias towards growth. Growth oriented portions of the fund would include small-cap US stocks and international/emerging market stocks. As you get closer to retirement you need to slowly get more conservative, with more of the fund allocated to fixed income (bonds). You still want some growth but you don't have as much time to recover if the market takes a steep drop. The retirement funds do this automatically for you. A 2050 or 2055 fund would likely be 100% equities (US large cap stocks, small cap stocks, and international stocks). The difference is likely small, although the 2055 fund would stay growth-oriented for a longer period of time, since it assumes retirement is 37 years away versus 32 years away for the 2050 fund. I would suggest the 2055 fund based on your age, as long as you are aware that the fund will be very volatile early on, with a few bad years but more than a few very good years. You have to be willing to keep putting money into it through thick and thin. Good luck and welcome!

[alleniverson]

Thanks for the advice.

So I guess I'll go with T. Rowe Price Retirement 2055.