[jiwonstr]

Hi all,

I'm 24 year old guy with a decent salary consulting job. I have just paid off all my student loans (whew!) and want to start jumping into saving money.

I recently started to plan for my 09 resolutions, and want to open up an IRA account in addition to my firm's pathetic 401(k). I am currently putting 5% of my paycheck to 401(k) and want to put another 5% to my IRA.

My question to you is what's the best place to open up an account? I'm leaning toward to Roth IRA since my 401(k) is before-tax, so I want one with after-tax.

Fidelity? T. Rowe? E*Trade? Anything else? I know there are tons of sites you can choose from, but they must be different in some way, right? Since I'm only 24 and has 40 more years to work, I'll probably go aggressive (8:2) with Equity and Mutual Funds. Any other advices on how to allocate my assets?

Also, I'm planning to save for a house. I consider myself very good with personal financing; have no balance on my credit cards, no other debt. Is opening up an online savings account (ING or others) and contribute monthly payments a good way? I'm determine to save up $50000 by end of 2012.

Thank you, your comments will be very much appreciated.

[ebaines]

First, make sure you have a safety net in place - the equivalent of several month's salary in a very safe place, such as in a savings account at ING or HSBC. Current yield is around 3.5%, which in this environment is pretty good. After that, if you have disposable income to invest if I were you I would increase the amount going to your 401(k). You say it's a pathetic plan - how so? The tax advantage of the 401(k) beats the Roth IRA. You are allowed to contribute up to $15,500 in 2008 to your 401(k), so you have loits of room to incrase it. At your age I think if you can get in the habit of saving 10% of your salary in yor 401(k) that would be excellent. If you can save more than that, consider an account that will allow you to save for big ticket items like a house, kids education, etc - not an IRA but a regular brokerage account and/or mutual funds. There are lots of good choices, consider Fidelity and/or Vanguard for low cost mutual funds with lots of choices of some good, top rated funds. I personally use Schwab because they have access to lots of no-load mutual funds and you can also easily include ETFs or individual stocks in your account.

[Fretless]

First I would be certain you're eligible to open a Roth IRA as opposed to a traditional IRA. For single filers the limits are a salary of up to $101,000 (to qualify for a full contribution); $101,000-$116,000 (to be eligible for a partial contribution). Also, I would look into the tax advantages/disadvantages of Roth v Traditional (you can find a concise discussion on Wikipedia).

I agree with ebaines on the ING account and on increasing your 401(k). Is it pathetic because they don't match? Do they have lousy funds to choose from? Also you say you want to mix Equity and Mutual Funds. I'll assume by "Equity" you mean purchasing shares in a public company. My take on this is you need to be able to watch your holdings and reallocate based on earnings, the market, trends, etc. I'm not saying you need to be a day trader, you just need to stay on top of your holdings.

With Funds, on the other hand, you're paying a registered investment adviser to do this watching and reallocating for you. It's in his or her best interest to maximize returns as they get a percentage of the assets under management. The more you make, the more they make. I'd research funds. If you want more risk, go with riskier funds - emerging markets and international funds, small cap domestic funds. There's all types. Look at the Fund's 3/5/10 year performance. Note that almost all funds are down over all, but look to see which one's weathered the current storm better.

Here's how I look at investing in an individual stock: If I buy Google, whatever happens to Google, happens to my holdings. They go down 15%, I lose 15%. But if I buy a tech fund that holds 10% of its portfolio in Google, if Google drops by 15%, my fund only decreases by the proportion of Google the fund holds. Plus if the investment adviser sees that Google is going to be in an extended downturn, he may dump it before it drops too much and buy MSN instead (hypothetically, of course). The adviser is watching his fund 24/7 and doing whatever he has to do to maximize performance. If you don't have time to do the same, I wouldn't necessarily invest in individual stocks.

Finally, as to purchasing your first home: there is a first time home buyer exception to the penalties for withdrawals for IRAs. Talk you whomever you open the IRA with, but you don't necessarily need to put money in savings for a down payment - you may be able to take it from your IRA.

[jiwonstr]

I say it's lousy because they do not match my contribution yet. I think I will need stick here another two years for them to match 50%... they also have very limited, and lousy funds to choose from in my mind. I'd say about 20-25 funds available, which is shorter than what my friends have in other firms. The ratio right now is 90/10 on equity/bond. I may even go stronger with equity since I'm only 24.

I just opened up an Roth IRA account with Vanguard after many research. I chose them because of their STAR fund, which is mutual fund of mutual fund and has $1000 to start one. I invested $2000 yesterday.

Thanks for all your answers, they provided me with good tips. Although I'm bit sadden about my firm's 401(k) I believe I have bright future ahead. I'm currently putting 12% into my 401(k) and plan to inject $400/month to my Roth in 2009.

[Fretless]

Sounds good. Since you opened a Roth IRA, just keep an eye on your salary and the requirements to be in a Roth versus a traditional IRA. As your salary increases, you may need to switch IRA types.