College students who work may sometimes have a job that offers a 401(k) with a match. It’s easy to sign up and even easier to contribute. If you’re in this category, please consider yourself fortunate, as your employer has made it easier for you to save for the future.
Many times, however, college students do not have opportunity, as their status as employees (part-time/intern) doesn’t allow them to participate.
Does that mean you should wait until after you graduate before you get started? I don’t think so, as it generally accepted that the sooner you start the better compound interest will treat you.
Having an Individual retirement fund (IRA) can help get started and when you get a job after graduation, supplement your retirement strategy.
There are many excuses that people make, but the truth is IRAs are doable.
Excuse # 1: It’s very complicated to start an IRA.
Banks, brokerages, and credit unions offer IRAs. There a wealth of options. The good news you can compare and see who offers the best deal. Some charge a flat fee for the year, some take a fee for each transaction made, others can take a percentage, and some do all of this. The idea is to keep your fees as low as possible and get the best performance. After all, you’re a college student with a limited amount of cash. Once you find a company that offers you what you want, you fill out an application to open an account. It’s not that complicated. It took me about 10 minutes to fill mine out.
Excuse #2: I need a lot of money to start an IRA.
Not true, there are companies that offer funds for $250 or less to get started. American Funds, for one, has no minimums on some of their funds if you automatically deposit into the account.
Excuse # 3: My paycheck will be sucked dry by my retirement contributions.
If you have your contribution automatically deducted from your banking account, you can catch a break on the minimum. Some offer $50 monthly minimums. That’s just $12.50 a month! (By all means, if you can put more in, then do so.)
Excuse #4: I have to be a financial genius to pick the right retirement portfolio.
Front-load, back-loads, expense ratios, and other terminology seem complicated. It’s not really once you get familiar with the terms. Wikipedia and Fool.com can guide you when you come across something unfamiliar.
Front load is the percentage you pay when you first buy the mutual fund. Back load is when you sell it off. Expense ratios is how much you’re charged for having this fund. It pays for the paperwork mailed out, salaries, etc.
Starting an Individual Retirement Account: Resources on the Web
There are a lot of realy good articles if you want to learn more. Here’s are some of my favorites.
- Which IRA is the Best Deal? (Get Rich Slowly)
- Save Now, Retire Rich (Free Money Finance)
- How Much Money Do You Need For Retirement? (The Simple Dollar)
- Determine your Retirement Needs in 3 Easy Steps (Moolanomy)
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Photo Credit: PPDigital
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Nice. I’m planning to start one soon–depending on the insanity of life and whatnot.
Lol I understand. Life throws curveballs.
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