Opening a roth IRA ?s

[johndenver]

Background: Am 23, had real world job for 1 year, am 1 paycheck away from having 6 months living expenses cash on hand ( 10K )

My next goal is to fully fund a roth 401K before april ( cause thats when the deadline is I believe).

I am thinking of opening it through my bank, bank of america, is this normal?

What mutual fund should I put it in, for 4K I believe its better to be in just one fund.

Is it better to save 4K and then put the whole lump sum in at once before the deadline, or can I make monthly X$ contributions without getting killed on transaction fees? do mutual funds even have transaction fees?

Thanks

[punkass]

First, good for you in thinking retirement investment at a young age.

April is the deadline for tax purposes.
As long as fees are low to none, go with whoever can give you most options. But when you're starting out, there's no need to divvy up your $4k into 4 sections. I'd just put it in the total stock fund until you get 3 or 4 years worth of money in there. Then you can start playing with allocation percentages.

EDIT: This is a very good idea. I just want to make sure you're maxing out any 401k possibilities that would be eligible for a match from your employer. This should be #1, then you can go for ROTH after.

[johndenver]

ya i contribute enough to 401k to get the full match, but I dont want to do more than that because Roth IRA seems like a much better investment

- more flexible withdrawing criteria
- better for someone young in a lowish tax bracket

EDIT: in my OP i meant roth IRA not roth401k

[gull]

Great job for deciding to open a Roth IRA.

Bank of America may not be the best place to open your Roth IRA.

You can make periodic contributions if you don't have 4k at the beginning. But if you do have 4k at the beginning, I would recommend putting all of it in at once.

[yellowbastard]

Open a Roth IRA with Vanguard online and buy one of their life-cycle funds. Target retirement date 2050 should be right for you. Also where do you have your E-funds? I'm considering putting mine into one of their conservative balanced funds. Go to their site and look around.

[kidpokeher]

Banks and mutual fund companies generally limit your investing options to what they're selling (i.e. BofA mutual funds) whereas an independent brokerage like Scottrade lets you invest in whatever you want; including BofA or Vanguard.

[kelvinsense]

Mutual Funds charge, and can't beat an index fund over the long run. And since you're young, you have the long-run to look at.

Index funds also charge less than Mutual Funds, usually by half.


I'd say open your IRA and put it in index funds. SPY tracks the S&P 500, and has averaged 10-11% for over 10 years.