I recently learned I can contribute up to $5,000 to an IRA. In 2012 I was in the 15% tax bracket because I only worked a 4 months of the year. In 2013 I expect to be in the 25% tax bracket. I am 24 and have no current investments.
I heard from friend i should put $5,000 into an IRA and take the tax benefit $5,000x15%= $750 cash back now. I am considering this but was wondering how much exactly can I expect the $5,000 to be, 35 years from now, when I am 59. If I can't touch the $5,000 (with the limited exceptions) is the $750 benefit now worth the cost of not having access to the $5,000 for 35 years!? [assume i never intend to purchase a home and live in an apartment]
Look my friend, nobody knows what the future will hold. Having said that, if you are 25 like you indicated, investing with more risk taking is the proper strategy since you will have plenty of time to recover in case something goes bad. Investing in individual stocks will return the most for you. If you do not have the time to investigate you should invest in either lost cost mutual funds or low cost etf's. Vanguard is a good place to start. Enjoy!
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