The Time to Start an IRA is Now

Two weeks into the new year many resolutions slip away, and many of those resolutions have to do with money. One resolution that is especially important this year is starting an IRA or Individual Retirement Account. If you qualify the Roth IRA is the best choice because the contributions are taxed before you put them in which means when you take them out it is tax free. The younger you are the more potential for tax free gains is possible, the older you are the closer you are to getting to it without being taxed.

The Roth IRA allows $5000 to be put in which is higher than the previous maximum of $4000 in 2007. This divides up into less than $100 a week in contributions, you don't have to put that much in but if you can it will pay you in the long run. If you know anyone that invests they may not be too happy right now since the Dow was over 14,000 back in October and it closed at 12,853 today.

This means if you are considering you future and retirement you caught the best sale you could get in the stock market. The stock market has been in a sell off since the beginning of the year and stocks have dropped considerably. A new investor has the chance to buy good companies after they have been sold off at a discount and build a good portfolio that should show impressive results by the start of 2009.

If you build a diversified portfolio of large cap stocks that pay a dividend you will be on your way to building a future. By being diversified you buy stocks in different sectors meaning different businesses. Large cap means that the companies are the biggest companies like GE, AT&T, Exxon, Wal-Mart or Microsoft. The large caps may pay a dividend better than your bank pays in your savings account.

If you reinvest the dividends then your stock in the company will increase and over the years will grow because of the reinvestment and growth. This tax free growth should outpace inflation which your savings account is probably not doing. The Federal Reserve has been dropping interest rates and will continue to to improve liquidity. The earnings reports are coming out gloomy and CEOs are giving doomsday predictions in order to lower expectations.

The market will probably drop some more but it has dropped quite a bit already. The new investor has an opportunity to pick up good stocks cheap for the next few months so if you ever though about it, now is the time.