Why College Students Should Invest in a Roth IRA

College students have a lot on their plates with their school work, home work and jobs while trying to work through life in the real world. Too few take the time to look at the big picture and consider important issues about retirement planning and other financial strategies down the road. Retirement often isn’t a concern until later when job security is more promising but a key to better retirement planning is starting as early as possible.

Why Roth IRAs Make Sense

For students looking to earn money on a tax free basis, a Roth IRA fits the bill perfectly. When money is deposited into a Roth IRA account, it will continue to grow tax-free and there are no taxes to pay after you withdraw it during your retirement years. By investing early, you can make smaller deposits into the account which has a longer time period to grow into substantial savings for your golden years.

IRA stands for Individual Retirement Account and is used to save money towards retirement. Within the Roth IRA account, investors can also have stocks, mutual funds, bonds, real estate, and certificates of deposit. The Roth IRA serves as a place to handle your investments as you continue saving. The money deposited into a Roth IRA account has already been taxed, unlike with a traditional IRA account.

Eligibility for a Roth IRA is simple. If you have earned income from a job, you can open an account. If you are a college student currently without a job, it would be recommended that you find a job if only to start saving for later. You will be allowed to contribute as much money as you have earned through your job so if you have only earned $3000, that amount will be your contribution limits. As you get older and graduate from college, you will also have contribution limited based on your income.

Where Can I Open a Roth IRA?

You can find Roth IRA providers at your local bank or by conducting a Google search. For the new investor, it is best to keep it simple and find a no-cost account. Once you begin to get the hang of Roth IRAs and investing in general, you can expand your investment opportunities.

As time goes on and you continue to build money in your retirement account, you’ll likely be more inclined to not only keep going but also increase your deposit amounts. When you find your first job that allows for additional retirement savings options like a 401k, you’ll be able to add even more to your retirement fund and likely be more understanding of the importance of early savings.

This guest post was written by Brandon Langston of RothIRA.com.