Roth IRA or more index funds?

[En Passant]

I am 21 and am going to be graduating from college this June. I currently have about $4500 invested in VTI, which is a vanguard index fund. I want to invest about $5000 more. Would it be more wise to set up a roth IRA and max it out for the year, and put the remaining $1000 in the market? Or just dumb the whole $5000 into a mutual fund?

[poker327]

Roth IRA, provided you earned the money according to IRS regulations, otherwise you are not allowed to contribute it to a Roth.

[gull]

Roth IRA.

[Shoe]

Max out your roth first, then invest any excess.

[wmspringer]

Always a good idea to put money in a Roth if you can.

[danny31415]

Why can't you do both? Go to vanguard open a roth ira and put the money in the same fund you would have otherwise. You can even get the money you put in back out if you need it without any penaties, so there is no reason to not do the roth ira (minor note: you can't get your gains out without penalty).

In fact if your income is low enough for the year you might even get a tax credit of up to 50%, see http://www.irs.gov/publications/p590/ch05.html . (I just noticed you might have problems if you are a full time student, oh well)

[GoblinMason (Craig)]

Roth - the amount of tax savings and growth in the long run is amazing.