I just got done flipping through Schwab’s Spring 2009 issue of their On Investing magazine. Some things I thought hit particularly close to home for me (a 20-something woman who paid way too much in capital gains taxes in 2007) include…
How Roth IRAs can help young investors:
- Contributions come from after tax money. The dollars in the account can grow tax free. (You can play around as much as you want buying and selling and experimenting with stocks without making a mess of your income taxes if you do so inside your Roth IRA.)
- Paying taxes now instead of later can be especially appealing if you expect to be in a higher income tax bracket when you retire. (When you’re an entry level employee you’re probably not making as much as you will be at the end of your career and thus you’ll be in a lower tax bracket – take this opportunity to pay as little tax as possible on your money for investing.)
- You can still contribute to a Roth IRA for 2008 until April 15, 2009 as long as your adjusted gross income is under $116,000 (single) or $169,000 (married filing jointly).
Develop a tax-smart retirement portfolio (these guidelines will help you minimize the amount you pay in taxes on your investments):
- Investments in individual stocks you plan to hold less than one year, mutual funds that generate significant short-term capital gains, taxable bonds, and real estate investment funds should be in tax sheltered accounts like your IRA or workplace retirement plan.
- Investments in individual stocks you plan to hold more than one year, tax-managed equity funds and low-turnover equity funds such as index funds, municipal and savings bonds should be in your taxable accounts such as brokerage, bank and mutual fund accounts. (I could improve my index fund asset allocation plan by aiming to have my CDs and S&P 500 investments in my brokerage account and my small cap and international investments in my Roth IRA.)
Women and investing:
- Did you know that the average woman in her 20s or 30s has less than $500 saved, yet her average unexpected expenditures in a given year are $2,000?
- While a three to six month emergency fund may sound like an obvious financial strategy for the seasoned investor, you’d be surprised to discover how many of your friends, coworkers and loved ones don’t have this basic financial cushion. (After a bit of overly aggressive investing when I should have been saving in cash, I finally have three months worth of expenses available in cash. I hope you’re saving too.)
Related posts:
Learning About Investing as a Child
The Best of Less Is More: February 2009
Asset Allocation
Asset Allocation May Update
Invest in a Green Future
 Subscribe via RSS |  Subscribe via Email | learn more about subscribing |
{ 1 comment }
I will recommend using DesktopBudget.com to manage personal finances. Its the best offline personal finance manager I have seen so far.
Comments on this entry are closed.