Going to open a Datek account pretty soon.... any advice?

[gopunk]

not stock advice, but like nitty gritty advice... like stuff with taxes or fees...

 

[777php]

Originally posted by: gopunk
not stock advice, but like nitty gritty advice... like stuff with taxes or fees...

dammit...i was gonna tell you something stupid like invest in MCI, Enron or something like that.

Datek fee's are relatively low so you're good there.
Tax-wise, as long as you keep it in for the long run don't worry about taxes unless you plan on cashing out your gains.

If it is a long term investment, like for your retirement, have you though of a Roth IRA? You can always invest that way.

 

[gopunk]

yea i was planning to go with a roth ira for a mutual fund that i was recommended. with roth ira, you pay no taxes until you take your money out, right?

with non roth ira stuff... when would i be paying taxes? when i buy? sell?

 

[Scipionix]

Originally posted by: gopunk
yea i was planning to go with a roth ira for a mutual fund that i was recommended. with roth ira, you pay no taxes until you take your money out, right?

with non roth ira stuff... when would i be paying taxes? when i buy? sell?

Do you have earned income, i.e. a job? Traditional IRA is tax-deferred. WIth a Roth IRA you pay taxes going in. You never avoid paying taxes, you can only change when you pay them. Which IRA is better for you depends on how you expect your income to vary throughout your life. Also keep in mind that there are penalties for IRA withdrawals before you are 59.5.

 

[Entity]

yea i was planning to go with a roth ira for a mutual fund that i was recommended. with roth ira, you pay no taxes until you take your money out, right?

with non roth ira stuff... when would i be paying taxes? when i buy? sell?

Roth IRAs are tax-deductible, though, I thought - which means for you, they help out with student aid (FAFSA). I found that out two years ago.

Rob

 

[gopunk]

Originally posted by: Scipionix

Originally posted by: gopunk
yea i was planning to go with a roth ira for a mutual fund that i was recommended. with roth ira, you pay no taxes until you take your money out, right?

with non roth ira stuff... when would i be paying taxes? when i buy? sell?

Do you have earned income, i.e. a job? Traditional IRA is tax-deferred. WIth a Roth IRA you pay taxes going in. You never avoid paying taxes, you can only change when you pay them. Which IRA is better for you depends on how you expect your income to vary throughout your life. Also keep in mind that there are penalties for IRA withdrawals before you are 59.5.

yup, 'bout 17-18 hours a week at $11.25 but my income is nearly completely disposable, so i have a decent amount to invest (for my age).

so... i expect my income to decline for a few years (grad school), then go up a lot (work...hopefully start a business). i dunno what this means...

penalties are okay, like i said, i don't want to put all my money into a roth ira...

and what about just stocks? when do i pay taxes for those?

 

[gopunk]

Originally posted by: Entity

yea i was planning to go with a roth ira for a mutual fund that i was recommended. with roth ira, you pay no taxes until you take your money out, right?

with non roth ira stuff... when would i be paying taxes? when i buy? sell?

Roth IRAs are tax-deductible, though, I thought - which means for you, they help out with student aid (FAFSA). I found that out two years ago.

Rob

mmm.... i'm a newbie, what do you mean "they help out"?

 

[Entity]

mmm.... i'm a newbie, what do you mean "they help out"?

Well, what you invest in a Roth (I think it's Roth; get additional info before trusting me ) is deducted from your reported income. As such, if you made $10k last year (or whatever) and invested $2k (I think that's the limit) you could deduct it from your reported income on your 1040, and consequently financial aid would reward you for having earned $8k, as opposed to $10k. That make sense?

Rob

 

[DaveSimmons]

Originally posted by: Entity

yea i was planning to go with a roth ira for a mutual fund that i was recommended. with roth ira, you pay no taxes until you take your money out, right?

with non roth ira stuff... when would i be paying taxes? when i buy? sell?

Roth IRAs are tax-deductible, though, I thought - which means for you, they help out with student aid (FAFSA). I found that out two years ago.

Rob

No, you have it backwards.
Traditional IRA = reduces taxes now (deductible from gross income *) but you pay taxes later on 100% of what you withdraw ("tax deferred")
Roth IRA = no affect on taxes now (does not reduce taxable income) but grows tax-free so you pay 0% in taxes when you withdraw at retirement.

* as long as you're not eligible to be in an employee retirement plan

 

[gopunk]

Originally posted by: Entity

mmm.... i'm a newbie, what do you mean "they help out"?

Well, what you invest in a Roth (I think it's Roth; get additional info before trusting me ) is deducted from your reported income. As such, if you made $10k last year (or whatever) and invested $2k (I think that's the limit) you could deduct it from your reported income on your 1040, and consequently financial aid would reward you for having earned $8k, as opposed to $10k. That make sense?

Rob

i see, i see.... wow that's pretty nifty

 

[DaveSimmons]

Originally posted by: gopunk

Originally posted by: Entity

mmm.... i'm a newbie, what do you mean "they help out"?

Well, what you invest in a Roth (I think it's Roth; get additional info before trusting me ) is deducted from your reported income. ... Rob

i see, i see.... wow that's pretty nifty

Except that that's a Traditional IRA not Roth Also, FYI the max 2002 contribution has increased from $2K to $3K. I've already funded mine and am trying to time the bottom of the market for buying something like VFINX (S&P500 fund).

 

[gopunk]

Originally posted by: DaveSimmons

Originally posted by: gopunk

Originally posted by: Entity

mmm.... i'm a newbie, what do you mean "they help out"?

Well, what you invest in a Roth (I think it's Roth; get additional info before trusting me ) is deducted from your reported income. ... Rob

i see, i see.... wow that's pretty nifty

Except that that's a Traditional IRA not Roth Also, FYI the max 2002 contribution has increased from $2K to $3K. I've already funded mine and am trying to time the bottom of the market for buying something like VFINX (S&P500 fund).

ah, good to know. i dunno if i can max out mine (i don't make that much ), but oh well.

so uh.... what kind of taxing goes on with normal stocks?

 

[DaveSimmons]

ah, good to know. i dunno if i can max out mine (i don't make that much ), but oh well.
so uh.... what kind of taxing goes on with normal stocks?

If you buy individual stocks, you'll be taxed on any dividends they pay just like on savings/CD interest.

If you buy a mutual fund, it pays dividends too (typically in December) but also capital gains from the stocks it sells. Say it's an S&P 500 fund, 7 of the 500 are being dropped this month so the fund must sell all holdings in those 7 and buy up shares of the new 7 that are being added.

For IRA accounts none of this matters since taxes are either deffered (trad) or growth is tax-free (roth).

You brokerage sends a form in January that lists your taxable dividends & gains for non-IRA accounts.