I'm in the stock market game...kind of

I need to catch up on my List progress.  I've marked a few things off over the last couple months, I just haven't had time to document them.  I hope to catch up with that this week.

Today let's talk about money...

#25- Invest in the Stock Market

When I first put “Invest in the stock market” on my list, I had visions of trading stocks and buying little pieces of companies I loved and believed in.  But I needed to start with my retirement fund.  After talking to a financial planner I realized I needed to get my Roth IRA fully-funded before I start “playing around” in the stock market.

First I converted the money I had rolled over into a traditional IRA from all my previous 401K plans into a Roth IRA account.  Why did I convert it to a Roth account?  I didn’t have too much in there so paying the taxes on the conversion wouldn’t be a huge deal.  (With Roth IRAs, you pay the taxes up front so that when you withdraw funds in retirement, they are tax free.  And your money also grows tax free in that account.  With traditional IRA accounts or 401ks you will have to pay the taxes on the money you invest when you take it out during retirement.  Sure you get the tax free benefits up front, but Uncle Sam will get his money later when you are probably in an even higher tax bracket.  But with the Roth you pay the taxes up front (when you are younger and in a lower tax bracket).  

The maximum you could contribute for 2010 was $5000.  I only contributed $1000 in addition to what I rolled over in to that account, but that money has made almost $800 in interest so far.  This year I will probably only contribute $3000 but I hope to get up to contributing the full $5000 maximum soon.  

And hopefully when I get hired on instead of just being a contractor then I will also be able to contribute to a 401K plan as well.  Once I get to a level where I can live comfortably while contributing the max to my Roth IRA, my 401K, and have 6 months worth of salary in savings, then I can play around in the stock market.

For now I think I will stick to smart investing for my future before I start to play around with my money.

But that Roth IRA money is invested in some stocks so I am in the stock market game...kind of!