Need some help.. young and getting into investing/finances.

[Shinymoney]

Alright here is where I am at currently. I am 21 years old. My current "excess" money is about 800$ a month... that is money after i have payed all obligations that i have. I plan to be making considerably more money in the next year or so without much more going to bills and such.
I have a 1year CD with an APY of 3.25% that matures in June that i started with 9000$ in. I also have a RIRA with 5000$ in it for the year in a 3month CD with an APY of 2.9% that matures in December. And a checking account with ~1000$ in it.
I currently have no debt.

I kind of set this all up just so my money was not sitting in a low yield savings account but now i really want to get into investing and don't know where to go from here. What i think i should try and do first is get the RIRA invested into something better once it matures but i don't know what. I do plan on adding 5000$ to it every year. Is RIRA the best option but is just limited to 5000$ so my investments need to spill over into other areas?

Also from my limited understanding the best time to start investing would be pretty soon as a lot of things are really low.

Anyways as you can see I am pretty clueless. I really want to not have to worry about money ever and I am hoping if I start saving and investing now it will help.

Any suggestions of what to do with the money and where to do it will be appreciated more then I can explain in words. I currently feel lost and no one i know knows enough to make suggestions.

[jIM_Ohio]

CDs for a 21 yo planning for retirement are probably not your best choice.

I would plan to put $500/month into a RIRA with a mutual fund company, and probably rollover the CD RIRA to same company.

Look for a target retirement fund for around 2070, or learn about asset allocation and choose individual funds. I suggest looking at T Rowe Price (that is who I use), Fidelity or Vanguard.

[NYFinancialPro]

CD's are probably not the best option for you now, unless you are saving for a particular short, or medium term goal. For your retirement the roth ira is probably the best option, the targeted funds take the hassle out of investing, however be careful with the fees associated with some of the funds. Also, depending on your responsibilities you might have some other needs that might need to be addressed.

[kork13]

You're in a great place right now--no debt, a good amount of money available to you for investing, and steady income to continue saving/investing with. First, I'll agree that CD's are not for you, except as part of an EF.

As Jim said, a target-date retirement fund would be great for you to start in, because you can have it in your Roth and just pour your money into it over time. Find the latest one you can, probably 2050 or maybe 2060. They'll take care of the decisions for you, adjusting the asset allocation over time to become slowly more conservative.

For a slightly more involved hand in your investing, determine your acceptable level of risk, develop an asset allocation, and go shopping for mutual funds. Index funds, following indexes such as the S&P 500, DJ Wilshire 4500, and MS Int'l EAFE, are simple, low-cost ways to get a broad market exposure. With a little more research, you can focus on specific markets with the many MFs that investing firms such as Vanguard and others offer.

Don't worry about not understanding it all right now, it comes with time, experience, and research. I'm just 22, and am also still trying to learn how the market works and how to invest properly.

$416/mo will just about max out a Roth IRA right now, so with the remainder of that $800, I would just put it into a high-yield online savings account or money market (MMA at a bank, or MMF at an investing firm). Keep in mind that each of those have different attributes, risks, and returns, but really any of them will work for you. Put away your money, build up a healthy EF, and save money for larger purchases/expenses you may be looking at down the road.

Does your employer offer a 401k or similar plan? That's another option for socking away some of your money for later on.

[Shinymoney]

For the retirement fund, find the latest one i can? or find one for when i plan to retire?

Can i transfer my RIRA that is currently in a CD into a retirement fund with say vanguard?
Would putting the rest of my money in a index such as Vanguards total stock market index fund be a good idea? At least once the stock market settles down?
And then build up an emergency fund in a money market savings account and once that is at a level i am comfortable with add to the index fund some more?

Is the money I invest in a index fund somewhat liquid? If not what are the penalties for withdrawal normally?

No option of 401k.

[iwebgo]

I think you should always try to live below your means and keep saving money and be debt free. Maybe first try save up one years worth of living expenses that you keep in a savings account.
Then also have some money like you now have in a CD.
Maybe after that Buy a house to live in (not as an investment), if you can.

Then you could start putting a little bit of money to mutual funds each month, maybe something like 10% of your "excess" money.

Real investment opportunities will come to you as you get older.

[kork13]

For the retirement fund, find the latest one i can? or find one for when i plan to retire?

Can i transfer my RIRA that is currently in a CD into a retirement fund with say vanguard?
Would putting the rest of my money in a index such as Vanguards total stock market index fund be a good idea? At least once the stock market settles down?
And then build up an emergency fund in a money market savings account and once that is at a level i am comfortable with add to the index fund some more?

Is the money I invest in a index fund somewhat liquid? If not what are the penalties for withdrawal normally?

First, I'll have to disagree somewhat with iwebgo... even when we're young, "real" investments are fully available to us. Plus, we're in an even better position to take advantage of them, given our longer timeframe.

For a target-date retirement fund, look for one around your planned date for retirement, for us probably at 2050. If you want to be more conservative, do 2040. More aggressive, 2060 (if you can find one).

I don't know for certain, but yes, you should be able to transfer the CDs into another investment, such as a retirement fund, as long as it is also in a Roth. You may or may not want to cash out the CD's though, because you'll forfeit some interest. However, if you want to jump in now (due to market conditions, etc.), then it might be worth it to you... depends on how much you'd lose out on.

The Vanguard Total Market Index is a fairly good one, many people use it. As the name implies, it represents pretty much the entire spectrum of the market with its holdings, and as an index, has low costs. However, I would say find something suitable and then start getting into it (progressively...use dollar cost averaging) as soon as you can, given current market conditions. With stocks unnaturally low right now, it's highly likely that once the market eventually recovers, buying low like this will let you ride it back up.

For your EF, it would be best if you could do both at the same time. So add $400 to your Roth funds, and add $400 to your EF. That will just about max your Roth IRA, and build up your EF at the same time.

As for liquidity, Roth IRA's are essentially non-liquid. Once you put the money in there, you can't take it out without very stiff tax penalties--any gained returns are taxed at your normal rate, plus a 10% (i think) penalty. You can move it around between different investments within the Roth, but you can't take it out.

If you want more liquid investments, you want to use a regular taxable investment account, or just use a MMA, MMF, or Savings acct. For now, I would just recommend focusing on your Roth for retirement investments, and a MMA/MMF/OSA for your EF and regular savings. For the EF, definitely build up AT LEAST 3 month's worth of expenses, preferably closer to 6 months.

[Yoursavingcoach]

You are way ahead of most

Congratulations on your financial picture and willingness to make it better.

52 percent of Americans are struggling and you are looking at investing at age 21.

Here is the scoop. I've been into stocks for a lot of years. Get yourself diversified, but invest some money in your own stocks that you can enjoy trading and watching. Be smart and follow trading rules. Make a plan when trading. Don't get emotional about the price.

Wait until the market calms down and find yourself a few solid companies that have hit an all time low and get in. You will double and triple you money quickly.

The prediction is an 18 month recession. Just when you think the market has stopped going down, wham.

When you get in on a low priced stock, hold out for your target price. Don't be stupid and run if something happens. That is a big mistake that many beginning traders make.

Dave Drew

[MYOM]

Your first investment should be in a financial education! If you don't know what you are doing you will trip, stumble, fall, and skin your financial nose.

Dan Clemons

[maat55]

As for liquidity, Roth IRA's are essentially non-liquid. Once you put the money in there, you can't take it out without very stiff tax penalties--any gained returns are taxed at your normal rate, plus a 10% (i think) penalty. You can move it around between different investments within the Roth, but you can't take it out.
.

Accually, you can withdraw the original contributions penalty free. But, you cannot replace them. You would pay tax and penalty on the earnings only, for early withdrawal. Because you put the money in after taxes, you do not have to pay tax or penalty on the contributions, only the earnings.