Vance Hurd

5-25-11
Wahlers-1
AP Economics
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Why I Should Open an IRA Fund

- IRA stands for Individual Retirement Account. An individual may put money into the account
and the amount deposited will be deducted from their taxes. At age 59 the individual may
begin withdrawing funds but will have to pay taxes on capital gains, interest and dividends
earned over the past years. It is available to everyone and there is no income requirement.
- A Roth IRA is essentially the same concept but with a difference in the way it is taxed. Roth
IRAs are not taxed by the government but are not tax deductible. It is available to singles who
make under $95,000 and married couples who make under $150,000 per year. Money can be
withdrawn at any time.
- The appeal of using a Roth IRA comes from being able to withdraw the money at any given
time, the disadvantage being that the money is non-deductible.
(Source: http://beginnersinvest.about.com/cs/iras/f/tradvsrothira.htm)
- Income requirements for IRA: none
- Income requirements for Roth IRA:
Single and maximum of $95,000
Married and maximum of $150,000
- Age Requirements:
Under age 70 for regular IRA
None for Roths
(Source: http://www.banksnb.com/about/faqs/ira_faq.asp)
- Accounts can be opened at banks or mutual funds companies, such as Fidelity and American
Funds.
(Source: http://amateurassetallocator.com/2008/03/28/which-mutual-fund-company-is-best-foryour-ira/)
- Money can be deposited into an IRA account through transferring online funds, writing a
check, or setting up a contribution over the phone.
(Source: https://us.etrade.com/e/t/prospectestation/help?id=1901000000#Know4)
- Contribution limits: Maximum of $5000 if under 50, maximum of $6000 if over.
(Source: http://www.savingtoinvest.com/2009/08/new-roth-ira-conversion-rules-and.html)
- Safety of investments:
Common stock: Risk involved because of fluctuating value
Corporate bonds: Lower risk than stock, but lower interest rate (Source:
http://www.sbli.com/lcdocs/IRA-Options-for-the-Risk-Averse.pdf)
Index funds: Very low risk, slow and steady (Source:
http://www.getrichslowly.org/blog/2007/06/21/which-investments-are-best-for-a-roth-ira/)
ETFs: Risky because of tracking error (Source: http://seekingalpha.com/article/263800-5-etfpicks-for-an-ira)
Treasuries: Very conservative, free of credit risk (Source:
http://research.scottrade.com/public/knowledgecenter/education/article.asp?
docId=d016e8d565074d3ea4614736a55d2872
- Median amount earned yearly by music composers: $45,970
- Final pay check: $1,354.55