Great Question

Hello,
I was at SigEp on Tuesday night when you came to speak to our chapter. I am going to be on co-op in the up coming weeks and my mom has been talking to me about starting up an IRA. I understand the difference in the Roth and traditional I just had two questions regarding them. I have been looking at different brokers and can't make heads or tails of what the brokers are saying, charging etc. I was wondering which broker you would recommend for any IRA or is there a website that gives a comparison to all the major ones? Also with being in school I was wondering if it would be more effective to work towards saving money for the future or trying to take out as few loans as possible ( I already have more than $25,000 in school loans as a sophomore) I want to try and keep them as few as possible but I see the need to save.
Thank you for any help,

Answer: As always check with a financial professional before making any decisions to be sure it is appropriate for your situation.

First off regarding the IRA question - ROTH is the better choice while your income is low enough to be eligible.. The money goes in after tax - grows tax deferred but the benefit is if you leave it in until you are at least 59 1/2 it all comes out tax free. That is a huge benefit.

Regarding companies - T ROWE PRICE, VANGUARD, FIDELITY and SCHWAB are all good reputable discount firms. I believe for a young person starting out the target timeline funds work the best. Different companies call them different names but the concept is you pick the closest date for your retirement date - so you may look at a 2050 or 2055 fund. There is no reason to pay a broker 2 or 3% upfront for a good fund, also avoid class b funds, they are sold saying you pay no upfront fee and as long as you keep it with them for 5 or 7 years the back end load disappears. The catch is the internal cost of the fund is much higher than funds at the discount firms. Class b funds have 12 B 1 fees that cut at your overall return.

Regarding the student loan dilemma - it is tough but I still think if you can start to save for retirement now in the long run you will be ahead due to the Rule of 72 and the doubling factor over time. Once you lose this time it is gone. My thought is really really review your spending and see where you can cut out little things that are not really improving your quality of life and i think you will be surprised - most students i work with find a minimum of $600 a year most find more.

Once you graduate if you don't jump into a super expensive life style you can tackle your loans - hopefully you will never be poorer than in college so once you graduate - keep on that thinking for a few years and you will be shocked at how fast you can get the loans paid down. Then you increase your quality of life in an affordable manner.

A few fun but insightful books to read:
A million bucks by 30 - Alan Corey
You are broke because you want to be - by Larry Winget

Regarding education: https://personal.vanguard.com/us/planningeducation/general/PEdGPCreateHwToCreatePlnContent.jsp but you can go to any of the sites and look under planning or education. They all have good on line tools. If you have any more questions - please let me know - shoot me an email or leave a comment on the blog.

Stay tuned.......