- There are two different types of IRAs: Traditional and Roth IRAs.
- An Individual Retirement Account (IRA) is a type of savings account that is designed to help you save money. Allowing for tax deductible contributions throughout the, and withdrawals at retirement will be taxed as ordinary income.
- A Roth IRA is a retirement plan under US law where contributions are not tax deductible, and distributions are made tax free at retirement.
- Decide which IRA suits you best. Compare Roth vs. Traditional IRAs.
- Choose an "all in one" fund or customize your portfolio. Pick investments for your IRA.
- Always you should do your homework before you choose and make the decision that will best suite your needs.
Certificate of Deposit or CD
A type of savings tool that can offer a higher return on your money than most standard savings accounts. A CD is a timed deposit. A savings account you can deposit and withdraw funds relatively freely. With a CD you agree to keep your money there for a set period of time or term length. Term lengths can be as short as a few days or as long as a decade.
- The standard range of options is between 3 months and 5 years.
- The major benefit and reward for keeping your money in a CD is banks offer a higher Annual Percentage Yield than a normal savings account. On a 3 year CD most banks offer a o.5% APY and most credit unions offer a 1% APY or higher.
- Be sure to choose the right CD for you based on how much you can afford and for how long. Otherwise there will be early withdrawal penalties if you opt to take your money out earlier than the original agreement. Usually between 3 to 6 months of accrued interest.
Rule of 72
The "rule of 72" is a quick way to calculate how long an investment takes to double, when given a fixed annual rate of interest. Divide 72 by the annual rate of return you receive on your investments and this number will represent a close estimate of years it will take to double your money.
- 72/Compound Annual Interest Rate = Years required to double your investment.
- 72 is divisible by: 2, 3, 4, 6, 8, 9, and 12 making for easier math.
- A $10,ooo investment with a fixed annual interest rate of 8%, according to the "rule of 72" would take 9 years to double your money.
- 72/8 percent fixed annual interest rate = 9 years *Note when entering the interest rate enter as 8 giving you 9 years instead of 0.08 which would give you 900 years.
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