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28 year old bartender confused about mutual funds and IRA's

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28 year old bartender confused about mutual funds and IRA's  Reply with quote  

I'm hoping that someone here can help me, as I am completely clueless about mutual funds, brokerage firms, IRA's, and investing in general. I am 28 years old and have been meaning to start an IRA for so long, but I'm just so completely baffled by it that I don't know where to start.

My grandma started saving money for me to go to college when I was born, and turned the account over to me when I was about 21. I went to school for two years, and decided to stop going because I had no idea what I wanted to major in. I don't foresee myself going back to school in the near future, and I've still got all this money just sitting there, and I think I want to start an IRA with it instead. I'm not sure if I should move the money to a brokerage firm and start an IRA, or just leave it where it is and turn it into an IRA. I don't really even know the difference between a brokerage firm and where I have my money right now.

So it's about $13,000 that I have in this account. It's in Oppenheimer funds. About $8,000 in the Capital Appreciation Fund A (OPTFX) and about $5,000 in the Global Strategic Income Fund A (OPSIX). The whole thing was only worth $7k when my grandma handed it over to me, and now it's at $13k. And I haven't put a dime into it, so maybe my money is in a good spot and I should just "turn it into" an IRA... if that's even something I can do.

I was also thinking about just putting half of this money into an IRA, and taking the other half and putting it towards a down payment on a house, because I feel like that would be a pretty good investment for me right now. So I can stop paying someone else's mortgage and put my money into something that I own.

Any help with this would be hugely appreciated!


To add to this, I have zero credit card debt. I have a car loan of about $7k that I should have payed off in 2 years. Awesome credit. And I am willing to put in around $100-$200 per month to my IRA. Not sure if any of that is relevant, but I just wanted to supply as much information as possible.
Post Sun Nov 30, 2014 12:33 am
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First off, some basics:

A Mutual Fund is just a bunch of people who all decide to give their money to someone else who then invests the money into various things with the hope of making more money than it would make somewhere else. For instance, at Vanguard, you can send them money, and it goes into your account. That money can then be invested in many different areas or funds. The fund we usually recommend is the S&P500 fund, because it is a very low-fee fund (less than 0.2% per year) and it basically says, "I think the best companies in the US are going to keep making more money every year compared to the year before." Now, it might actually lose value some years, but overall, this has been a good strategy, realizing about 6% to 7% after inflation for about the last 60 years or so.

Now, the second part of the basics: an IRA

An IRA is just a tax-defined way to invest money. You can actually set up a money-market fund that makes less than inflation inside an IRA. Most folks don't do this, as it means they lose spending power each year. Usually, the money in the IRA is set up in equity (stock) funds with some balance of bonds for "security" to minimize risk. So, your IRA can have mutual funds inside of it.

Your present mix has an income fund. That's a conservative fund, and won't make a lot of money, but it also won't take a lot of risks. At 28, you should be taking risks, so you should probably move 100% to the capital appreciation fund.

Now, it is possible the money is in a 529 fund. If that's the case - another tax-advantaged holder for funds - you must use the money for education, or incur a 20% (I think) penalty. You would be better off spending this money on school if that's the case. If it is not in a 529, then you can pretty much do what you want.

The IRA has a contribution limit of $5000 per year, so if you decide to move the funds to an IRA, you need to do it before Dec 31 (might be able to do it until April 15, 2015 instead, for 2014). We'd need more information to give you any detailed suggestions, but you might want to go with a financial adviser. I see that Oppenheimer has relatively high fees. If you aren't talking to the broker/adviser regularly and plan to leave the money alone (like in the S&P 500 mentioned above), then you'd be better off transferring the money to Vanguard, Fidelity, or T. Rowe Price, who all have zero load, low fee index funds. You've already paid 5% to Oppenheimer, and you give them another 0.8% per year. That's 16 times the Vanguard rate.

That's enough reading for you for now. Let us know if you want any further explanations or any other information.
Post Sun Nov 30, 2014 7:37 am
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This isn't you retirement plan. At all.  Reply with quote  

Government sponsored "retirement plans" aren't for you. They're for Uncle Sam.

Begin your new education by buying and reading the book, "Tax free retirement" by Patrick Kelly.
Post Wed Oct 05, 2016 8:56 pm
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The whole thing was only worth $7k when my grandma handed it over to me, and now it's at $13k. And I haven't put a dime into it, so maybe my money is in a good spot and I should just "turn it into" an IRA... if that's even something I can do. AI-100 exam dumps
Post Wed Apr 17, 2019 9:53 am
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