Where to invest money if employer does not offer 401k? (funds, pay)
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Just wondering what options my GF has. Up until this point, she's been focused on cutting debt incurred from her unemployment - knock on wood a big chunk of it will be paid by January. At that point I would like to suggest to her that she opens some sort of account for retirement. She wouldn't be able to put a lot of money in there as she needs to also build her savings and finish some other debt payments, but I figure it would be a start.
My questions are:
Can she invest before tax if the employer doesn't offer it? If so, how?
What options are out there and what make the most sense?
She's 31 and has a long way to go to retirement with the hopes of landing a job with benefits (401k etc in the next 2 years).
Also, maybe it doesn't make sense to do this now, maybe it's better to pay off the debt and just save in a regular savings account until a higher paying job with benefits comes along? The debt is all at 0-3% interest.
Can she invest before tax if the employer doesn't offer it? If so, how?
What options are out there and what make the most sense?
They're called Income Retirement Accounts (IRA's) There are several types.
The next step is choosing the right place to put that money (eg: Index Fund)
Quote:
maybe it's better to pay off the debt and just save in a regular savings account
It's not an either/or. You need to do **ALL** of these things.
IRA stands for "Individual Retirement Account". There are various types, and they are not one-size-fits-all. A Roth IRA may be fine for one person, and not right at all for another. Many are not even eligible for one. If you want the flexibility of deciding what investemnts to hold in an IRA, you may need to look into self-directed IRA's. These are typically offered by brokers rather than depository institutions and carry special risks as well as special opportunities. Do your homework before deciding anything.
Depending on circumstances (family to fall back on for example), an emergency fund should be established in addition to paying off high interest debt (basically anything except mortgage) prior to investing.
Due to low tax rates right now (if she isn't offered an IRA and has debt from unemployment, I doubt she's making 150k/year), this would be wise time for her to do a roth IRA. Diversify it with holdings in index funds / mutual funds with very low expense ratios. (IE, pick 2 to 4 equity index funds and 1 to 2 bond index funds)
Pay off debts, but don't worry about paying in advance on ones charging 0 to 3%.
Depending on where you live and the likelihood of continuing to live there, saving up a down payment and buying a house may be a great deal. My monthly payment on my house, minus principal, is less than I was paying for an apartment that was half the size. From a net worth perspective, that means I'm gaining pretty much every month. If she would need to move in the next five years, do not buy a house.
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