What is the best retirement option for someone that wants to save on his own?
Sep 21st, 2008 by admin
I am a foster parent and I get paid by my agency through a per diem. That means the money I get paid is tax free. And since I don't have a full time job, I don't have a retirement plan. I want to start saving for the future. Can any one help?
Although you don't have a retirement plan through your employer, you still have good options.
If you have a spouse that does have a retirement plan at work, you can probably contribute to what is called a "spousal IRA." You get the right to invest through your spouse's earned income. Like any other IRA, there are two types, the Roth and the Traditional. Unless your spouse makes a whole lot of money, I'd suggest the Roth. Just mention that when you open your account. You have to file your taxes jointly and make less than $156k (in 2007), but you can contribute up to $4000 (in 2007).
If that situation doesn't apply to you then you might be able to contribute to an IRA yourself using the money you earn as a foster parent. Check in with the IRS by calling their hotline and they'll be able to tell you right away. I'm guessing the answer is no since your income is not taxable, but I am not a tax lawyer.
Finally, if you can't contribute to an IRA, nothing prevents you from starting an account with any number of brokerage houses like American Century, Charles Schwabb, or Fidelity.
Without the tax advantages of an IRA or an employer's retirement plan, you'll want to be careful not to choose investments (especially mutual funds) that throw off lots of taxable income.
For newcomers to investing, I like to recommend a basic S&P 500 index fund. They have good inherent diversification, low fees, and tend to be pretty tax-efficient. There are many examples, but one example is Fidelity's Spartan 500 fund, found under the ticker FSMKX.
move back in with your parents….?
References :
Although you don't have a retirement plan through your employer, you still have good options.
If you have a spouse that does have a retirement plan at work, you can probably contribute to what is called a "spousal IRA." You get the right to invest through your spouse's earned income. Like any other IRA, there are two types, the Roth and the Traditional. Unless your spouse makes a whole lot of money, I'd suggest the Roth. Just mention that when you open your account. You have to file your taxes jointly and make less than $156k (in 2007), but you can contribute up to $4000 (in 2007).
If that situation doesn't apply to you then you might be able to contribute to an IRA yourself using the money you earn as a foster parent. Check in with the IRS by calling their hotline and they'll be able to tell you right away. I'm guessing the answer is no since your income is not taxable, but I am not a tax lawyer.
Finally, if you can't contribute to an IRA, nothing prevents you from starting an account with any number of brokerage houses like American Century, Charles Schwabb, or Fidelity.
Without the tax advantages of an IRA or an employer's retirement plan, you'll want to be careful not to choose investments (especially mutual funds) that throw off lots of taxable income.
For newcomers to investing, I like to recommend a basic S&P 500 index fund. They have good inherent diversification, low fees, and tend to be pretty tax-efficient. There are many examples, but one example is Fidelity's Spartan 500 fund, found under the ticker FSMKX.
References :