Start a retirement fund with fifty bucks (it’s that easy…)

… thanks to T. Rowe Price’s Total Equity Market Index fund (ticker: POMIX.)  Most funds require a few thousand dollars to open an account.  T. Rowe Price lets you open, say, a Roth IRA, with as little as $50 as long as you sign up for minimum automatic monthly contributions of $50 as well (taken right out of your checking account.)  With this particular fund, you get a low-fee, broadly diversified, US stock market index fund.  It’s the kind of thing you can invest in regularly and forget about until you’re within 10 years of retirement.

50_bill

(If you invested the bare minimum of $50 per month for 30 years at 7% interest, you’d have over $58,000.   Plus, you would only have invested $18,000 of your own money [= $50 * 12 * 30]. That’s an extra 40 grand in your pocket just for 50 bucks a month!)

POMIX’s expense ratio is a low 0.40% (not quite as low as Vanguard’s 0.18%, or Fidelity’s approaching-absolute-zero Spartan fund ratio of 0.10%.  Unfortunately, they generally require $3,000 and $10,000 to open an account, respectively.  If you have at least $3000, or can save it up, I recommend opening a Vanguard account instead, and investing in their total stock market index (ticker: VTSMX.)

UPDATE 11-16-2010: Vanguard now offers a $1,000 initial minimum ‘STAR’ fund that is a balance of 60% stock and 40% bonds.  This is an excellent way to get a ‘foot in the door’ and start building an investment account with Vanguard, my favorite choice for individual investors.  If you’re under 50 and investing for a retirement that’s still 10 – 15+ years away, switch your investment to the VTSMX fund mentioned above when you accumulate over $3,000.

Bottom Line

If you’re not saving for your retirement (or for whatever long-term goal you have), and you don’t have a few thousand laying around to open an account, you can still start with $50 today!

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One Response to “Start a retirement fund with fifty bucks (it’s that easy…)”

  1. Top 5 places to put your money TODAY « Words of Ward: Ward's Guide to Personal Finance and Investing Says:

    […] (#4.)  That’s fine, but do NOT neglect your retirement.  Investing early, even with just a little bit of money, is the most important factor to building wealth.  Saving for retirement will be way […]


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