Passively managed, low-expense funds that seek to mirror the result of a market index (S&P 500 or S&P MidCap 400). Index funds attempt to replicate stocks in the index. It is common for a large percentage of actively managed mutual fund results to fall below their benchmark index. Index funds are easy to buy and provide:
- Low expenses
- Low minimum investments
- Possible tax advantages In order to start saving and investing, you need to “pay” yourself first: Participate in your employer’s retirement plan at least up to the amount it will match.
- Examples: 401K and 403B
- Usually have several investment choices
- Pre-tax investments grow tax-deferred Contribute additional funds to a Roth IRA.
- $5,500/yearly limit on earned income ($458/ month)
- Contributions are after-tax
Withdrawals are TAX-FREE after age 59 ½ An IRA is flexible – within the same account, you can have stocks, bonds, mutual funds, cash, CD’s, and money-markets It will be up to you to decide whether you have the time and interest to manage your investments, or need to hire a professional such as a CFP® or investment broker to assist you.