I’m 19 and have moved back home to eliminate most of my bills, and so I’m looking to start investing for retirement or otherwise.
How/where should I start? I’m pretty sold on a Roth IRA, which I believe would let me withdraw to put a down payment on a home in the future.
My other concern is that I have a significant bit of student debt, some private, and some stafford. I will likely continue to take out stafford loans. What should I focus more on? Paying back loans? Investing? Or try to balance the two?
Thanks in advance.
Mark S 9:12 pm on October 21, 2009
As the second said, balance the two. Student loans are some of the cheapest loans you will ever get- cheapest meaning interest. Why are you having to pay student loans, now? Still in school or are you finished and out working?
Sarah C 9:12 pm on October 21, 2009
Depends on the interest rate since a Roth won’t let you skip paying taxes now. Most loans cost more in interest than the investments would pay so you should get rid of them first.
William H 9:12 pm on October 21, 2009
Balance the two with heavier payments on the debt, perhaps 60-40 or 65-35. You do not want to break the routine of saving. At 19 this is an incredibly wise action for you to take and you should continue it. If most of your loans are low interest, then you can afford to take some time to pay them off as this will establish a good credit history for you and the interest cost will be low. By all means, open the Roth and when you have the funds, a conventional IRA. The prime advantage of the Roth is tax free money when you withdraw at retirement. Congratulations on a very smart move.
F 9:12 pm on October 21, 2009
Honestly, if it were me I would be investing it only because I have experience investing (that doesn’t necessarily mean you produce a profit
If you have little knowledge on higher risk investments, you would be smart NOT to risk money you can’t afford to loose. You should wait as long as possible on the staffords until they are no longer subsidized (if subsidization hasn’t already ended). During that time, find the best CD or savings (doesn’t matter; point is safe investment) that fits that amount of time (now until the end of subsidization) and put it there. At least you’ll earn some interest income. It would be better than just paying the staffords back now; better the government pays for it than you ; ). Also compare the rate on the cd’s/savings to the private loan interest rate. See where you’d be better off (paying the loan now or put it in savings and pay it off slowly. Good Luck
P.S. I’ll be starting my first year of college @ Geneseo shortly. I’ll have to remember all this for when I’m in debt
BTW: I would definitely wait until I could afford to put money in an IRA. Being in debt justifies the postponement on the IRA
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