Am I doing it wrong?

LarkNow

Sorry I got here late, but I am just catching up on all of your money posts and, to tell the truth, they are freaking me out.

I am very fortunate to have had a good chunk of money set aside that my grandfather gave to me before he died.  It's paid for college and part of the house and now it's just sitting there, but I know it's not enough for retirement so several years ago I set up a Roth IRA, which I maxed out every year.

The amount of money I have in this Roth is almost exactly what I put in it.  I haven't put in a contribution this year (because I don't have a job and didn't make money this year, and you can only contribute earnings, not old savings) but still.  You all are looking at your retirement accounts and seeing interest and I am NOT.  So I ask you: am I doing it wrong?

chrissyvcm

To be clear, I am not seeing growth from interest, I am seeing growth from contributions. Last year I upped ours to 15% and that's really made a huge difference. In this economy, I wouldn't expect to see ANY growth from interest!

LarkNow

Ah, see the Roth caps you out at $5k a year.  What I really need is a traditional IRA (where you can contribute more) or, even better a 401(k) (which I will never have because I will probably never work at a for-profit intstitution).  $5k a year does not add up fast.  Especially without interest.  Especially when you don't have a job and can't contribute.

luckycooky

My growth isn't from interest it is because I have used some to play the stock market. When it crashed I increased contributions and the percentage that goes into stocks. Well, it's paid off so far. There is risk involved but I used an amount I was comfortable with, saw a financial advisor for a second opinion, and I know I will not retire for 30 years so I have time to recoup potential losses. 

Junebug060609

If its any consolation my retirement monies go up and down with the stock market.  They've taken a beating in the past year.  If I'm lucky, I broke even with what I had last October before things went south...and thats just because I kept putting money in even when the economy took a nosedive.  I was losing thousands each quarter, to the point that it was depressing to open the statements.  Thankfully as a 30-something I can ride it out though.  I feel really bad for those nearing retirement age that lost so much more.

LarkNow

Thank you for helping me to keep it all in perspective.  Growing up, whenever we learned compound interest in school they make a big deal about the money you have when you start saving at 25 vs 35.  My (younger) sister actually learned from that and opened her IRA when she got her first job at like 16.  I am so jealous.  I didn't start until I was 25 but I thought that would be early enough.  Now I am at 30's door with no more than what I put in and freaking out about it.  But I guess I do have at least 35 more years until I retire.  Perspective.

As Suze Orman says, time is the most important ingredient in any financial recipe.

mamie329

If it makes you feel better, I'm really doing something wrong in not having anything like that set up at all. I just have my savings and my checking. And a little 401K where my employer contributes. Money fail.

Junebug060609

It was some coworkers back in 2001 that got me to start my account.  There was a bit of a recession then, so it was a good time to get into the market.  I mentioned that I was considering it to a couple of older (40s to my then 20s) coworkers.  They all had the same response: Do it.  Put all you can in now.  As you get older things come up...weddings, kids, houses, caring for parents.  Put in as much as you can now.  All of them regretted not starting theirs before they started their families.  I chose to learn from their mistakes...even if it was a measly amount of money when I first opened it.  I don't have a ton in my retirement fund right now, but its at least a start. 

kaleyandjason

I just set up my 401K with my new job and have very little saved up right now anywhere else. I did just start my first "real" job, however. And DH has savings and retirement and a 401K and has contributed to it for about 10 years.

sarajoy12345

LarkNow:

Ah, see the Roth caps you out at $5k a year.  What I really need is a traditional IRA (where you can contribute more)

 

This is incorrect. The contribution limit for both types of IRA accounts (Roth and Traditional) is 5K per year for people our age. You CANNOT contribute more to a Traditional IRA. The difference is how they are taxed.

With a traditional IRA, you can deduct your contributions on your tax returns but when you take the money out after age 59 it is taxed.

With a ROTH IRA, you do NOT get to deduct your contributions (so they are post-tax) but when you take the money out, it is NOT taxed.

 Both types grow tax-free, meaning you do not have to pay taxes on dividends or capital gains.

What is your IRA invested in? If it is in cash of course you are not going to be making interest, especially in this environment. It should be in the market (meaning stocks or mutual funds) to get good growth. 

LarkNow

This is incorrect. The contribution limit for both types of IRA accounts (Roth and Traditional) is 5K per year for people our age. You CANNOT contribute more to a Traditional IRA. The difference is how they are taxed.

Interesting.  I did not realize the traditional capped at 5, too.  I thought it was more.  I knew about the tax paying at the end, which is why I picked the Roth because, ideally, I'll be in a higher tax bracket when I have to take it out.

And Mamie, that does not make me feel better at all.  I want you to do well, too!