Basic Question on Retirment Fund

[Relmiw]

hi, i am 23 years old and making essentially 25k a year as a farmer. technically this number is 12k, if that is relevant.

i just managed to pay off my student loans from 3 years ago, and in the next 3 years i plan to go back to school full time to finish a bachelors degree and possibly masters or doctorate in something like mathematics.

i know very little about this, but i heard it is a good idea to invest for retirement very early because some funds offer incredible interest rates, but have a yearly cap on what you can put in. is this the case? should i start saving for retirement this year in addition to saving money so i can go to school?

any help is appreciated. maybe ya'll have the answers or can direct me retirement for dummies or something.

[disneysteve]

hi, i am 23 years old and making essentially 25k a year as a farmer. technically this number is 12k, if that is relevant.

i heard it is a good idea to invest for retirement very early because some funds offer incredible interest rates, but have a yearly cap on what you can put in. is this the case? should i start saving for retirement this year in addition to saving money so i can go to school?

I'm not sure what your first sentence means. Do you earn 25K or do you earn 12K?

As for retirement, it is always a good idea to start early to get the maximum benefit from compound interest. Invest $1,000 at age 23 and earn 8%/year and at age 65, it will be worth over $28,000. Wait until you are 33 to put away that $1,000 and at 65 it will be worth less than $13,000.

I don't know what funds you are referring to with the "incredible interest rates" but I will say that retirement plans do have annual contribution limits. For example, you can only put $5,000/year into an IRA or Roth IRA. That might be the limit you are referring to.

[jIM_Ohio]

Retirement saving is best done over a long period of time. The younger you start the more compoind interest helps you.

There is a yearly max of 5k for investing in an IRA.

[maat55]

Just starting the habit of saving and investing is wise. You can choose a percentage you are comfortable with to start, but you eventually want to get to at least 10% of your gross income, investing for retirement.

There are many different types of investments:

Stocks
Mutual Funds (In stocks, bonds, both, money market funds etc.)
CD's
High Yield savings
Real Estate

Stock Mutual Funds are the most common for the average investor. You can open an Roth IRA through a bank or investment group such as T.Rowe Price, Vanguard, Fidelity and so on.

I highly recommend that you read a few books on personal finance. You can find them cheap at Goodwill or half price stores. Personal finance books will teach you about good money management skills and about the many different types of investments and estate planning.

[tmvijai]

As for retirement, it is always a good idea to start early to get the maximum benefit from compound interest. Invest $1,000 at age 23 and earn 8%/year and at age 65, it will be worth over $28,000. Wait until you are 33 to put away that $1,000 and at 65 it will be worth less than $13,000.

As for retirement, it is always a good idea to start early to get the maximum benefit from compound interest. Invest $1,000 at age 23 and earn 8%/year and at age 65, it will be worth over $28,000. Wait until you are 33 to put away that $1,000 and at 65 it will be worth less than $13,000.
.

Actually it worth $39,340 taking some assumption if you invest $1000 every year for 28 years(65years old). If you wait for 5 years, it will only worth less because compound interest does the magic.

As other suggested, there are lot of ways to invest. I always recommend a person to start with CD's. Thats a base, no risk way to start an habit for investing. You put away $100 every month automatically or manually, which create an habit for investment. Once you haev some amount, you can use it open Mutual funds which needs $1000 depending on the companies.

Thats my suggestion.

[Abiqua]

Try setting aside 15% of every paycheck. Put it in a savings/retirement account and pretend it's not there.

[anonymous_saver]

hi, i am 23 years old and making essentially 25k a year as a farmer. technically this number is 12k, if that is relevant.

i just managed to pay off my student loans from 3 years ago, and in the next 3 years i plan to go back to school full time to finish a bachelors degree and possibly masters or doctorate in something like mathematics.

i know very little about this, but i heard it is a good idea to invest for retirement very early because some funds offer incredible interest rates, but have a yearly cap on what you can put in. is this the case? should i start saving for retirement this year in addition to saving money so i can go to school?

any help is appreciated. maybe ya'll have the answers or can direct me retirement for dummies or something.

I'm going to assume you mean you earn $25,000 a year, but you take home $12,000 a year?

Also, I don't know what your talking about some retirement funds offer incredible interest rates. This makes me think you may be looking at Roth IRA's through a bank or credit union. DO NOT get one through those kind of places, instead go through a place like Vanguard or T. Rowe Price, much better returns, better fees, etc. I think with your low income, I would start off with sending a small amount per paycheck towards a Roth IRA. 10-15% would be a good place to start, but I would have to look at your expenses and take home pay first before I can give good advice.

Can you list your take home pay and your monthly expenses so we can help give you more details?

Also let us know if you are working FT, so we could give some advice around that as well.

Good luck!

Are you working FT to earn the money you are living on?