<p>@collage1 - Money in a Roth can be invested in anything in the stock market - so a Roth can be in a mutual fund. The Roth part just refers to the tax treatment of the money. The big advantage of putting money in a Roth as a young person are 1) usually Roth contributions are taxed in the year the money is earned, then never again. Teens usually don’t earn enough to pay tax anyway, so any money that goes into a Roth they will NEVER pay tax on the principal or earnings. 2) Time is money - the longer the money sits there, the bigger it grows. Money invested at age 18 should double something like 6 times by age 65 through compound interest.</p>
<p>Collage, a Roth is a kind of account (e.g., IRA, 401k, savings, checking, etc.); a mutual fund is a kind of investment (e.g., stock, bond, stock mutual fund, bond mutual fund, real estate investment trust , etc). </p>
<p>ETA: go to the library or Amazon and get the Bogleheads Guide to Investing. Tell yourself and your DH that it’s not a lack of faith in his handling of your accounts, but because you want to be capable if he gets hit by a truck tomorrow. </p>
<p>Thank you GertrudeMcFuzz – very helpful. Will discuss with my working kids.</p>
<p>And thank you ixnayBob – will check out the book. Would love to ask another question which was in one of my earlier posts that somehow got truncated. I have 2 Ds that have a several thousand dollars sitting in a savings account making nothing (.25%) which accumulated from birth to present day (not income). It may continue to sit for years or it could be used in as soon as one year from now as the general idea has been that it would be for a very special trip, possibly during the college years. If this was your kid’s situation, would you let it sit there or is there a better option? High risk isn’t okay but some risk is.</p>
<p>Collage, if it might be used in a year and you can’t abide a loss, I’d probably buy a one-year CD with it. If you could stand to lose 10-25% (or perhaps make the same), but most likely make 5% or so, I’d put it in a Vanguard Life Strategy Conservative fund. </p>
<p>Btw, I thought about my book recommendation, and maybe Bogleheads Guide to Retirement Planning makes more sense. Both are good books. </p>
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<p>Thats over a 47 year period…so doubling six times would mean doubling about every 8 years. Based on the rough “rule of 72” that would mean an average rate of total return of about 9%. Not impossible, but possibly a bit optimistic these days. </p>
<p>In any case, Roths are a good thing to put money into generally speaking. That’s why they’re limited, although the legislation allowing conversions opens the door for people with regular IRA’s to convert them and pay the tax that was previously deferred. IMO, this is something that is potentially very worthwhile to do.</p>
<p>Compared to regular IRAs, they sidestep the problem of potentially converting lower-taxed income into higher-taxed income, which happens if you have large capital gains and dividend income in a regular IRA account. They also don’t demand regular distributions. </p>
<p>Just a thought collage, or anyone else who wants to comment (especially if anyone has experience with this yet - I don’t)</p>
<p>You can set up a signal on a forex broker, which is basically a thing that copies trades from a professional trader (some are professional traders trading manually, some are “expert advisers” which are just algorithms). There are many different signals which vary from irresponsibly risky to pretty moderate risk (I don’t think any of these signals worth getting involved with could really be called “low risk”). You can trade on leverage but you should keep the leverage low. Note that since most of these trade at minimum 0.01 lots (which is basically 1000 units of base currency except Yen which is 100,000, meaning $1000 if we’re talking about a base of USD), you probably should have at least $1000. Some (most of the good ones, but some good ones are free) signals cost money monthly, anywhere from $20-$1000+. You should probably stick to $20 or $25 max if you do go with a paid signal at all.</p>
<p>Note that many of these signals you may not actually be able to use. If they use hedging (which is illegal in the US but legal in every other country), CFDs (which is illegal in the US and just a small handful of other countries, but legal everywhere else including Canada) you can’t use them at all. If they allow excessively high margin (the max leverage that’s legal in the US is 50:1) then you might as well not, since the trades will be scaled down by allowed leverage, regardless of how much margin the signal actually uses. If a signal allows more than 100:1 you should probably not consider it at all. </p>
<p>One that looks to be relatively low compared to other signals is this one, also one of (if not the most) popular signals: <a href=“35235 trading signal not found”>http://www.mql5.com/en/signals/35235</a> - Note that getting that signal costs $20/month. </p>
<p>One that looks like a risky strategy but done well (specifically no stop loss) is: <a href=“http://www.mql5.com/en/signals/7695#!tab=history&page=1”>http://www.mql5.com/en/signals/7695#!tab=history&page=1</a></p>
<p>One that looks pretty safe (low draw down, high win percentage, only trades 2 pairs so not spreading himself too thin) but with lower returns is this: <a href=“36171 trading signal not found”>http://www.mql5.com/en/signals/36171</a></p>
<p>And there’s plenty of others you might consider. </p>
<p>Like collage1 I have question about IRAs for young people. I’d like freshly working college grad D to put money into an IRA until she can start contributing to the retirement fund at work. H doesn’t see a reason for her to segment retirement funds from other savings. He doesn’t want her to tie up her funds. In my opinion, times have changed. She will not likely have the options we have (defined benefit + small IRAs + 2 401ks). I think that even psychologically, it is good to have retirement funds that are separate from other savings/investments. Who can help me prove this point?</p>
<p>I opened a Roth IRA for kid #1 when she first start working in high school, because she was a minor I have full control of it. Originally she didn’t have enough(less than $3000) so I had to put in STAR mutual fund at Vanguard, it was ok but not great. In the last few years I converted to an equivalent PRIMCAP account at Vanguard. I didn’t like Index fund for her, I like a little active management. I also think I can take a little bit of risk because she is so young therefore I put 100% in stocks. She has great returns and she does know she has some money. However I keep it under my control because on paper it still listed her as a minor until I turn in paperwork to prove otherwise. Actually, Vanguard person told me this too.</p>
<p>Roth IRA, my husband and I don’t qualify for Roth IRA, but the backdoor to open one is through open a non-deductible Traditional IRA and then immediately convert to Roth IRA. This works as long as there are no other Traditional IRA accounts because the tax gets very complicate when it comes to distribution if you have other Traditional IRA. So it’s best to avoid it. </p>
<p>There was a window of time a few years back to convert some IRAs to a Roth for those who didnt qualify for a Roth, and they gave 2 years to pay the taxes. Our taxes those 2 years was higher than my income.</p>
<p>@Vladenschlutte , I was a software developer specializing in FX for around a decade (and longer in related fields). I’m honestly not intentionally being snarky, but I have no idea why you would suggest such a thing in the context of this discussion. Did I miss a round of drinks? 
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<p>Because I’m reading up on it at the moment, want to try out a signal on a real account soon. So, as a way to get a response on it for now. Also, it does look like a good idea. </p>
<p>What’s your opinion? </p>
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<p>I think it is solid psychologically - the whole out of sight, out of mind thing, etc.</p>
<p>But I am not sure yet it makes sense financially not because how it is structured today (I think Roth is a great idea for the young) but what will happen in the future.</p>
<p>WIth 17T in debt and all the other issues we have, at some point something has got to give. May not happen in our kids lifetime, but nice juicy retirement savings are a great target in the future (e.g. oh, you have a Roth, reduced SS payments to you, etc). </p>
<p>Who knows?</p>
<p>My kid did put money in a Roth from his first income at 18.</p>
<p>@Vladenschlutte , I think it’s like going to Vegas for the first time. The worst thing that can happen to you is that you win big. The result of that will probably be a lifelong gambling problem. </p>
<p>FX is a tough racket. Most of the people I know who made money there took it off the table and are now in index funds, collecting market returns. </p>
<p>@Mom22039, I think your daughter should have some non-retirement money for reserve. I think mine does too, I don’t know how much but I think at least 6 months. As for retirement account for your daughter , I think Roth IRA makes a lot of sense because the earnings will not be taxed and if she ever needs access to the Roth IRA money she can always withdraw the contribution without any penalty and leaves the earnings to grow tax deferred. Besides when she needs to buy a house, I believe she can withdraw tax free up until a certain amount. You need to Google to get specific amount.</p>
<p>I’m a big believer in having an emergency fund and retirement savings for the kids (adults too) My kids have regular savings for their college spending money and roth’s. I’d have to find a compounding calculator but I’m pretty sure they could potentially not save any more money after college and have enough saved at retirement. Not that I’d suggest it but compounding is a powerful thing. </p>
<p>Another book I really liked is The Automatic Millionaire - the idea behind it is to make all savings set automatically so you never see it hit your bank account and you save without obsessing and thinking through every detail. I’ve always done that with the 401k and kids college funds - it’s taken out of my payroll and I never saw the money hit my account in the first place. </p>
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<p>Compounding is powerful (Einstein is reputed to have called it the 8th wonder of the world), but I’d be leery of not saving after college. </p>
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<p>Probably not unless we’re talking they have 200K saved before college now. With real returns of 5% (which is high but not ridiculous), each dollar becomes $7 after 40 years, $9 after 45. It’s a big factor, but if we’re talking about about 10K or 20K or something, that’s not going to be all that great of a retirement (which will already be kind of late in life anyway).</p>
<p>What do people think is a reasonable average rate of return over time? I think DH is way too optimistic when he calculates how much our investments may grow over time. I think he assumes 7-8%, which seems way too high for me. I’d probably go with 5%, at best, but I’m more of a worrier than he is.</p>