Investing in the new year

I got an email from my dad this morning reminding me that with the new tax bill that was just passed, the government will be taking 2% less of your salary this year for Social Security (FICA). YAY! Since I doubt it will be around when we retire, I would much rather invest it myself.

May I suggest that (especially if you didn't know this was coming) you invest this 2% in your retirement and jump start or pad your savings!

First, if you have a work retirement plan (401K, TSP, 403B, whatever is available) where they MATCH your contribution, you BETTER be putting money into that account (but only up to the match, unless you have lots of extra $$). You are THROWING away FREE money if you are not! Seriously go sign up for it NOW (don't wait) if they match any amount of your contribution! You can't pass up free money and you won't be able to make that return on your money anywhere else!

If you already contribute to the plan up to the match, or your work does not match it, then open up a ROTH IRA at any discount brokerage (we personally use Fidelity, but there are MANY good ones out there!). We are still at historically low tax rates, so take advatage of them NOW and get tax free money in your retirement. If you have kids, you are in a lower tax bracket then you will be in retirement! We know the tax rate will have to go up, so take advantage of the low rates and pay it now, and live a tax free retirement :)

Take that extra 2% and have it AUTOMATICALLY withdrawn from your account into a Roth IRA (or into your work's retirement account). Then you will never realize the extra money you have and spend it. You also don't have to make the conscious decision to save it either.

If you have maxed out both your work retirement match and your ROTH IRA's (you can have 2 if you are married, one for each), then I want the kind of money you are making! Just kidding :) Then, if you have kids, open or contribute more to their 529 accounts for college. Here in Oregon, you get a nice little tax deduction if you contribute for your children into the state's plan. So you get tax free money for college and a tax deduction for contributing.

So please do not consider this money extra money to spend - look at it as extra money for your future and get saving (or adding to) for your retirement!

Get investing!

I love investing - I read magazines about investing and like to watch shows on CNBC. I took a year or more off from paying attention to it much, due to the fact it was depressing. I let all our investments ride and ignored them, and when things turned around, we made all the money back (lesson to never panic and wait it out - unless you are older, then that is different case)... So recently I have renewed my love for investing and gotten back on the bandwagon - I have been rearranging retirement accounts and buying stocks, ETF's, etc...

Recently, someone asked me the best way to start investing (mainly because they didn't want to have to do the reading on what was best way to start).. First of all, if you have a 401K at work and your work matches, you BETTER be putting money in to get that match (up to the match), otherwise you are just THROWING away money!

Second, if you are doing that, or your work does not offer a 401K, open a Roth IRA ASAP! Many companies have minimums, but some don't so look around to find one with LOW costs and NO hidden fees. Roth IRA will give you tax free money when you retire. We have both a Roth 401K and Roth IRA's, so we shall be living our retirement mostly tax free :) (we personally use Fidelity for everything but our 529 college savings accounts and sharebuilder, but there are MANY good companies)

Now if you just want to put a little money into investing a month - I would start something like a sharebuilder account. If you don't have a Roth IRA, you can make this account a Roth IRA and they have NO MINIMUM amounts to invest and no account minimums, so even if you only have $10 or $20 to invest a month, you can still do it! No excuses. Their cost to buy a shares or mutual funds is only $4 - one of the cheapest rates you'll find (I have one of their plans, so it is even less a month per trade)... They even GIVE you $50 as an account bonus for opening an account.

Then pick a stock (or mutal fund) of a good, reliable company that gives a good dividend. companies like (these are their stock symbols) JNJ, PG, GE, WMT, COST, T, KFT, etc... all are companies you can almost rely on doing well - just think of one of you favorite companies and look at their stock. Pick one with a good Dividend rate - for example AT&T (T) has one of the highest divided rates at a little over 6%!!! You can't get 6% from your money sitting around. So high dividends are nice. The last few years, when stocks were in the crapper, my Disney shares were stagnant, but they still made money from the dividends.

Then just set up your account to invest - at least sharebuilder can do this, I am not sure of other sites - to invest $20 or so a month (or less, No minimums, but you do still pay the $4 to trade, so make that $4 worth it!) into that stock (or mutual fund) - if you are going to do more than 6 stocks, then get one of their plans, but if you are new to investing, stick to ONE stock at first (with a good dividend) and then once you are more comfortable, you can try some more. Have it set up Automatically each month (forced savings/investing), and you don't have to even worry about it - really easy :)

So there - almost everyone has an extra $10-20 a month - or you can find it - to start investing (make it a Roth IRA if you don't already have one!!) Remember, you can always remove your principal investment from a Roth IRA at anytime (but you must leave the earnings in until you retire) Just pick GOOD, RELIABLE companies and go for that dividend!! Now go start investing - it is easy and we aren't getting any younger, and you NEED to do this for your future!!