Investing for retirement

1998 was the year of the Roth IRA. That’s the Individual Retirement Account named after US Senator Roth,the architect of this new retirement vehicle.

Unlike the traditional IRA, which is taxed deferred, the Roth IRA is essentially a tax free retirement account. Which means you can invest up to $2,000 annually, and by the
time you are at least 59.5 years of age, you may withdraw your retirement nest egg without having to pay taxes on all those years of compounded investment returns.

Naturally, the earlier you start, the better of you will be, since you would then have more time to accumulate a substantial holding when you finally retire, be it at 59.5 or 65 years of age. Most experts agree that a young man, say about 25 years of age, could easily use a Roth IRA to accumulate over a million dollars by the time he is 65 years of age. Simply calculate $2,000 over 40 years at the historical market average of about 11 percent a year.

So whether you already have a government pension plan, or a 401 (k) plan (if you work in the private sector), you could always open up a Roth IRA to boost your retirement income.

If you didn’t open up a Roth in 1998, there is still time to do so: you have until April 15, 1999 to open one up for 1998. Then you can still invest more for 1999, up until April 15, 2000.

Since stocks have historically offered the best investment returns, mutual funds are a good place to open up your Roth IRA. Here are a few options to consider. Each come with low minimum initial investments (since our economy is so weak):
Preferred Value Fund (1-800 – 662-4769). A large-cap value fund with low turnover and a minuscule 0.84 annual expense ratio. One of the better performing value funds. All it takes is $250 to open up an account. No sales loads involved.
Safeco Funds (800-426-6730). A solid stable of reliable mutual funds, including Safeco Growth and Equity funds, both solid long term performers. No sales loads. Expenses also quite reasonable, mostly below 1 percent. $250 minimums for IRAs.
Transamerica funds (800-892-7587). Expense ratios are a bit high, but performance has been outstanding and no sales loads are involved. Minimum initial investment: $250.
Babson Funds (1-800-422-2766) and The Selected Funds (800-275-1575) are two other fund families with low IRA minimums ($250 each) and good fundamentals.

But whatever your choice, it might be good idea to open up your Roth IRA today. Twenty, thirty, or forty years from now, you might be very glad that you did!($)