How to Save For Retirement With e-How earnings

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By Doodlebugs
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Save For Retirement With e-How earnings

In these tough times it can be difficult to come up with money to put toward retirement. Every little bit helps and as this article show you can even use e-How earnings to save for retirement.

Difficulty: Moderately Easy

Instructions

Step 1

Here are some ways to save for retirement with your e-How earnings.
First set up an IRA at your local bank or with an online brokerage service such as Scottrade or Firstrade. Seach for online brokers such as these with low transaction fees. Most do not charge an annual account fee for retirement accounts but make sure before you deposit any money.
Step 2

Take advantage of tax deferred savings plans. Your choices are a traditional or a Roth IRA. Currently you can put up to $5000 per year (per person if married) into either one. The advantage of a Roth IRA is that even though you will pay taxes on that money you will never pay any more taxes on it or it's earnings if you leave the money in until age 59 1/2.
Step 3

Avoid funds with high fees. You may be depositing small amounts of money each month but anything helps if you aren't saving for retirement now. What will reduce your rate of earnings though is transaction cost. Even discount brokerages charge around $7.00 per trade and if you bought $100 worth of a stock or an ETF your up front cost would be 7% and that is a big hit. Just deposit your earnings into the IRA's cash account until you have $300 or more and then make a trade.
Since mutual funds may require $1000 or more minimum investment or a fixed monthly amount an ETF is a great choice for an IRA.
Step 4

Learn about ETF's. An ETF is an Exchange Traded Fund and it is similar to a mutual fund but trades like a stock. An ETF is made up of many stocks and there are many types of ETF's to choose from, from conservative to risky ones with potentially high returns. You can buy one share or as many as you can afford for one transaction fee of around $7.00
If you are in your twenties and thirties you will want to buy mostly ETF's that are growth focused. If you are forty and beyond you will want a mix of a bond fund ETF and stock ETF's. As a rule of thumb you should have whatever your age is in bonds or a bond ETF since you want to be more conservative the closer you get to retirement.
Try Invesco Powershares for ETF's at Powershares.com
Step 5

Check with your bank about opening a Portfolio Management Account or PMA. Wells Fargo offers such an account for $25 per month which includes premium checking, higher savings interest rate and 100 free stock trades per year. Since stock trades cost around $7.00 this is worth more than the service costs.
Invest all of your e-How earnings, plus whatever extra money you can come up with from other sources and you will be saving for retirement without affecting your budget too much. Every little bit helps and the earlier you start the more you can take advantage of compounding and stock market returns over time.