Savings and retirement?

[s2kinteg916]

I been reading alot of books aorund this topic but unsure how to go about this. I am thinking of setting up a savings account at ING Direct to get a rainy day fund going. Is there tax on the interest at ING Direct ?

Another thing im worried about is retirement whats the best way to go about it being a young webmaster ?

[AndyH]

If it is a normal savings account then you will be taxed on the interest at your normal rate.

Talk to an accountant. :)

[Chris]

I have an ING account as well, but it is not for retirement.

Most people will recommend something like an IRA for retirement. This is where you put the money in and it grows tax free but you cannot withdraw it until you reach retirement age.

I don't plan on retiring at retirement age, I plan to retire quite young, so that isn't for me.

Personally, I consider my real estate investing to be for retirement.

[Billyray]

Mate, firstly I'd recommend that you do yourself up a budget. Work out what your incomings and outgoings are and then ensure you always save at least 10-15% and direct these savings first to a buffer / emergency cash reserve and then once you have that, direct future savings to growth assets.

Most countries have tax incentivised savings vehicles (401k or whatever) designed to encourage you to save for your retirement.

Don't put it all in the one place. Don't invest it all in one share, one bank account, one savings vehicle - diversify.

Find out what compound interest is, what leverage/gearing is and use them.

Put a plan in place.

Every man and his dog will tell you the best way to save or invest but do your own homework and work out what you are comfortable with. If you don't understand something don't do it.

Get advice from professionals.

s2k, I love your question because it shows you are on the right track.

[Cutter]

When it comes to investments, you really have to figure it out for yourself. I've been reading and studying this stuff for years and I'm far from an expert.

In your case, I would stick your money into US savings bonds for now, interest rates should be going up a bit more. Because you are young you can afford some volitilaty that older folks can't. I don't think the stock market overall is going to do real well over the next year or so, so I would hold back and study in the meantime.

For starters check out http://www.fool.com/ and Yahoo Finance

[MaxS]

I also have an ING account. The interest is unfortunately taxable.

[s2kinteg916]

Do they send you a 1099 at the end of the year ? or how does it work ?

[mini]

All well said by BillyRay. Diversifised your investment - never ever put all your eggs in one basket.

I personally don't like putting money in cash forms like the ING savings. After inflation, the cash worth less. It doesn't give you great returns compare to other type of investments.

I used to be scared of shares, but now owning heaps. I also put some $$ on my mortgage. I also have a bit of mortgage fund too.

If you live in Australia, subscribe to Money magazine. It will give you a start on how best utilise your money (whether to put them all in your super,etc). If you have lots of $$, I suggest you see a financial planner who's independent, meaning he/she doesnt sell other products or get any commisions from any investment companies.

Good luck.

[mini]

I think investing back to your business is also the way to go :). Your business will grow and earn more $$$

[bbolte]

if you're looking for something to do for rainy days, i'd recommend going with at least something like a money market. the gains aren't huge, but they're generally better than a traditional savings and it's pretty liquid.

[demosfen]

Things like US bonds and saving accounts are high-risk investment and I would stay away from it. You are counting on Feds reducing amount of money they print, and it just ain't gonna happen. I just got two 5-dollar bills from the bank today that happen to have sequential numbers. 8% inflation this year, likely double digits next year. 4% before tax saving accounts are a hidden confiscation scheme.
Some people say I am an idiot when I tell them to buy gold. I have the same opinion of them. They are the ones whose savings accounts lost half of it's value since 1970s

http://www.gold-eagle.com/editorials_04/images/lerner052304a.gif

[Cutter]

I think its a stretch to call bonds and cash high risk. Gold is nice but it has had a huge short-term run and is experiencing some significant volitility. Additionally there are very strong motivations for central banks to keep the price down. Central banks are constantly playing with money in an attempt to give their country an economic edge; anything could happen be it direct manipulation or legal controls.

I understand what is going on with the money supply and I've actually charted M3 to gold, which shows that relative to M3 gold is not actually at a high, but rather worth less than half of what it was in 1959!

Just be aware that there are many different forces in play here. If the US enters a hyper inflationary period its going to be very ugly no matter what your investments are. I would recommend some gold coverage, but thinking it is perfectly safe may be unwise.

As mini says, investing in your own business is a great way to go. The return I can get for $1 invested, short term, this month, blows away any investment. Long term projects have the chance to pay off better than putting some money in the next Microsoft. Because of this I recommend that business owners keep a reasonable amount of money in highly liquid assets that they can access when they see an opportunity.

I don't really like to discuss my own money publicly (its not really much at all.) However, I would suggest trying something like 30% diversified stocks; 30% US Savings bonds; 30% mutual funds; 10% gold (you can do an ETF.)

Ultimately, at the end of the day, you will get way better returns on your money by focusing on your own business in front of you. You are the expert in that business. You can do things no super day trader or mutual fund manager can do. Who was the real winner with Google? Larry Page and Sergey Brin. If they had spent their time trading dot com stocks they would not be billionaires today.

To sum things up: Keep your money well diversified; you might not get 30% returns yearly, but it will help you avoid those years were the speculative investors get wiped out. Put your money in things that are relatively "hands off"; your time is better spent on your own busienss.

[s2kinteg916]

Thats some good advice....

[Cutter]

Its just my opinion, consult your registered investment advisor before proceeding ;)

[demosfen]

I am not investing in anything with fixed single-digit 'profit' when inflation is close to double digits... In hypothetical scenario I had money to invest, it'd be like 70% silver and the rest between gold, palladium, and commodities stocks. Hold physical, and you also kill the taxman. I am not a huge fan of diversification because you have to diversify into less profitable and less researched investments. Buy 30 stocks, and it becomes a lottery, unless you can dedicate all your time to research. I find it difficult. Rather have a few winners.
If you have to invest in US bonds and such, maybe a better idea would be to find somebody on prosper.com to lend to? It kills the middle man.
Wait a second, here is an idea... Accept all those '0% APR until 2007' credit card offers we receive in mail and lend the money through prosper.com? Gotta think about this one.
Do you know you won't be able to map price of gold to M3 anymore because the Feds are no longer reporting it as of last month? If they are not printing money like crazy, I don't know why they would do that. They printed A LOT even when they reported it. It's probably only a matter of time before we have 10-15% inflation, or higher. Those US bonds won't help. Just my opinion. I'd invest in toilet paper and band aids if I had storage space. Tax-free and inflation free. :D

[Cutter]

No matter how much you research, the things that destroy value are often unseen, thats why you diversify. History shows that its a lot closer to playing the lottery when you have a handful of stocks.

I would avoid prosper.com like the plague. Its a good idea for a website, but I sure as hell would not lend money to someone if a bank wouldn't.

[demosfen]

Sort listings by credit grade. When credit grade is perfect, you still get way higher % than savings account or US bonds.
I realize the advantages of diversifying, I just don't think it's realistic. I own only 4 stocks and it's a headache, anything more than that will be sacrifizing quality for diversifying. You are still taking chances with well researched portfolio, but it beats randomly selected investments hands down.