SEP Investment Opinions/Suggestions Needed

[Predator314]

I'm new to all this and the more I read, the more confused I get.

I just received my first retirement/profit sharing figure for my job. So now I have about $4500 to invest however I choose (not really).

I'm looking for suggestions on how to invest the money. I'm a total newbie at this. However, my boss said that it must be a SEP (Simplified Employee Pension) investment. It looks like there are SEP IRAs and mutual funds.

I figure to get around this amount of money to invest every year (assuming the company makes money).

One thing I was thinking about was investing the money in some sort of fund or IRA (Roth?) where I could somehow withraw the money before retirement to buy a piece of property as an investment.

Any suggestions would be appreciated.

[DesertCat]

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One thing I was thinking about was investing the money in some sort of fund or IRA (Roth?) where I could somehow withraw the money before retirement to buy a piece of property as an investment.

Any suggestions would be appreciated.

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A mutual fund and an IRA are two different things. An IRA is a personal retirement account that you control. With the funds you place in it you can typically buy shares in mutual funds, individual stocks, or even individual bonds.

A SEP-IRA is a way of taking income (and employer contributions) and putting it in IRA without paying any taxes on it. You only pay taxes when you withdraw.

A Roth-IRA is a way of paying taxes on income now, and putting the after tax dollars into in an IRA and never paying taxes on it again (assuming gov. doesn't change rules).

If you withdraw from a regular IRA before retirement age, you will pay income taxes on the withdrawal, and you will pay a 10% penalty on top. I think there is an exception for investment property that you don't live in. IRA's also have limitations on how much money you can put in them depending upon your income level. Three are tons of details and everything I wrote here might be wrong, so you should consult a real tax advisor for advice before proceeding.

Lastly, since you appear to be an investing novice, if you want to invest money for the long term (i.e. 5 years or more) you should just buy a good (low cost) index fund. It will match the market's return, without any work by you. Vanguard is a prime provider of good index funds. You should never buy a fund that has a sales load (charge), either on purchase or sale.

[Predator314]

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Lastly, since you appear to be an investing novice, if you want to invest money for the long term (i.e. 5 years or more) you should just buy a good (low cost) index fund. It will match the market's return, without any work by you. Vanguard is a prime provider of good index funds. You should never buy a fund that has a sales load (charge), either on purchase or sale.

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I was looking at the Vanguard site earlier. Should I go online being a complete retard at this kind of stuff?

[DesertCat]

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I was looking at the Vanguard site earlier. Should I go online being a complete retard at this kind of stuff?

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You can setup your SEP-IRA there, and they'll walk you through it. Vanguard is very good, I'm not an expert on IRA fees but I would expect Vanguard's to be very reasonable.

[wdcbooks]

Don't worry about feeling like a retard. Vanguard will take it step by step and there are a number of good funds to choose from. I would also look at their retirement funds. They are dated based on the date you are most likely to retire. So you might look at Vanguard Retirement 2045, if you think you might retire in 40 years.

You will not be able to withdraw this money before 59 1/2 without a penalty. This is a good thing. If you want to buy property you should use other assets. Retiring at a reasonable age will be hellishly expensive with minimal government assistance. The more money you can accumulate now, the less you will struggle when you are in your forties and fifties. Saving now directly improves your quality of life for many decades to come. Withdrawing it and paying a penalty is shooting yourself in the foot.

[Predator314]

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Don't worry about feeling like a retard. Vanguard will take it step by step and there are a number of good funds to choose from. I would also look at their retirement funds. They are dated based on the date you are most likely to retire. So you might look at Vanguard Retirement 2045, if you think you might retire in 40 years.

You will not be able to withdraw this money before 59 1/2 without a penalty. This is a good thing. If you want to buy property you should use other assets. Retiring at a reasonable age will be hellishly expensive with minimal government assistance. The more money you can accumulate now, the less you will struggle when you are in your forties and fifties. Saving now directly improves your quality of life for many decades to come. Withdrawing it and paying a penalty is shooting yourself in the foot.

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I'll definitely give all this a look. I don't plan on touching the money if there is a penalty involved.

Thanks!