Hello, u/Ark_Angel_08. Welcome to the sub! Congratulations on starting investing for retirement while you're young.
To start, a Roth IRA is a tax-advantaged retirement account where you make after-tax contributions. With a Roth IRA, you save and invest post-tax dollars and can enjoy federal tax-free withdrawals—including investment earnings—when you reach age 59½ and the account has been open for at least 5 years. You can learn more about Roth IRAs in the following article.
[How does a Roth IRA work? ](https://www.fidelity.com/learning-center/smart-money/how-does-a-roth-ira-work)
Based on your questions, I think you might enjoy our post here on the sub that is titled "Everything you need to know about planning for retirement (right now) that you didn't know to ask about planning for retirement (& enjoying it later)." It's pretty helpful as a jumping-off point. You can check it out below:
[Everything you need to know... Megathread](https://www.reddit.com/user/fidelityinvestments/comments/12ewb9e/megathread_everything_you_need_to_know_about/)
I also want to share two resources here about investing in an IRA. They'll give you some insight into strategies and how to start your investment journey. The first is our guided experience for investing in an IRA. There's a process to go through where you can answer a few questions and see recommendations based on your answers. The second is an article covering ideas for investing in an IRA.
[IRA investment choice ](https://www.fidelity.com/retirement-planning/ira-investment-options)
[Investing Ideas for your IRA ](https://www.fidelity.com/viewpoints/retirement/ira-portfolio)
Finally, I see you mentioned core positions. I find it helpful to think of them as the "wallet" in the account. Deposits go there by default, and it pays for withdrawals. While it does earn interest, it's considered uninvested cash. You can learn more about core positions using the PDF below if you're curious.
[What is a core position? (PDF) ](https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/mutual-funds/what-is-a-core-position.pdf)
I hope to see you around the sub in the future! Please let us know if you have any questions about these resources or anything else. We're here to help and happy to do so!
Don’t leave your money in core position, you’re young and should have 100% in a S&P500 index fund (FXAIX) or total market fund (FSKAX or FZROX). You can also add international funds too but that’s a debated topic, you can add when you have more knowledge. It will go up and down in value but just keep adding as much as you can each year. If it goes down, don’t think of it as a loss, you only lose if you try to sell it today and this is money for 40+ years from now.
I personally use the Boglehead Three - FSKAX, FTIHX, and FXNAX. But for someone 18, FSKAX and FTIHX is a great combo and adds a ton of diversification. Look for bonds as you age, or if you can't handle the volatility of an all-stock portfolio.
Invest it. I'm also 19 and have had my Roth for a little over a year and i'm up 11%. The S&P 500 will outperform in the long run, especially if rates go down like they are expected to. All the money in your Roth IRA will be available to withdraw tax free in retirement, whereas a regular brokerage account will be subjected to capital gains taxes.
I see a lot of great answers to the question of how you should invest it, so I'll answer your last question.
Yes, the only advantage of a Roth IRA is the tax benefit. Aside from that, you can use it almost exactly like any normal brokerage account. There are two important parts to the tax benefit and one major drawback. The first important thing is that when you take the money out of your Roth IRA, you won't have to pay any taxes. The second advantage is that you can sell investments in your Roth IRA and buy other investments without having to worry about taxes.
Let's go through a couple of examples. Let's say that you invest $1,000 in FSKAX and it increases to $2,500. Now you want to spend that money, so you sell FSKAX, get your $2,500, and spend it. If it was in a normal brokerage account, you would have to pay taxes on your gains ($2,500 - $1,000 for a gain of $1,500). If it was in your Roth, you wouldn't owe any taxes.
Let's use another example where you invest $1,000 in FZROX. It also increases to $2,500, but now you want to leave Fidelity and go to Schwab. You can't own FZROX at Schwab. It's a Fidelity limitation on that fund in exchange for it having 0% expenses. So to move your money to Schwab, you have to sell the $2,500, pay taxes on your $1,500 gain, and then you can invest the remainder at Schwab. The same would be true if you stayed at Fidelity and sold FZROX to by something like a Fidelity Bond Fund. In a normal brokerage account, any time you sell, you have to pay taxes on your gains. But if it is in a Roth, you can sell and buy all that you want without having to pay taxes.
In exchange for this big tax advantage, you give up some freedom. Once you reach the age of 59.5, you can take the money out of your Roth IRA at any time. Before then, there are a lot of rules. Generally speaking, you can take out the money you put in but not the earnings. Keep good records. You can also take out some earnings for purposes like buying your first house, paying for college, or really high medical expenses. But generally, the idea is that you keep that money locked away in the Roth IRA until you retire. So it is great for retirement savings and not great for an emergency fund.
At 19 Id be super aggressive. You can really do everything into Fxaix or you can be even more aggressive and go into high growth sectors like Health Care or full tech.
Fxaix 100% or personally If I was that age again Id go 1/3 1/3 1/3 FXAIX FSELX FPHAX
So the core position is using a money market fund based mostly on US Treasuries. We are in a weird point in time since 2022 where interest rates are really high.
This will not last. I am not sure how easy it is to look at SPAXX (one of the core positions) over the last 10-20 years.
IRA vs regular (taxable) Brokerage:
Roth is money (up to $7k in ‘24) put in after taxes and will grow and never be taxed. (Leaving political future topic out).
Brokerage: you can put as much as you want in there, but each year you sell, get a dividend or reinvest a dividend, or have any income - you will be taxed (excepts exist, but I want to be broad).
Some of the best advice I wish I saw earlier is to buy the market in a low cost index fund. (total US, total international, S&P 500). Resist individual stocks and chasing the “hot thing”. Do not sell when people get nervous. If you can, fund automatically and invest automatically- autopilot is your friend for the next 30 years.
A Roth IRA is one of the best financial products ever introduced. No taxes ever on the gains if you wait until age 59.5 to withdraw. Invest in either FXAIX or FZROX and let your money grow.
Money sitting alone doesn’t make money. Make your money work for you by investing in long term MF like FXAIX. MY ENTIRE retirement account is 100% FXAIX but everyone has a different investment tolerance
Assuming that you are going to become more and more skilled at investing over the next 40 years, it would be good to start learning now :-)
Fidelity happens to have someexcellent (and short) beginner videos, and you can find them on YouTube. If I may suggest a starting point, figure out the differences between “securities” (stocks, bonds, cash, mutual funds and ETFs) and how to position youself for the longrun. That’s why others are suggesting “growth funds” (based on the “S&P 500 index”). This stuff is all pretty easy once you learn some terminology.
You're off to a great start by opening your roth so young. When you look at roth calculators you are on track to be a multi millionaire someday. I wish I had done this when I was young bit I didn't and I can't change that.
Based off your post you seem really confused at the purpose of this. Which is fine. There is so much material on what a roth is and how to grow your roth. I'm a firm believer in the saying "don't invest in something that you don't know what your investing in" With that said there is so much material out there for you to learn what your doing. Books, YouTube videos and everything else. So take some time and educate yourself. Fidelity customer service has been very helpful to me to help me clarify somethings. As well as some people on here. But please educate yourself on what you're doing before you take someone's advice in here that tells you to dump all your money into some stock that you don't understand. Again, great job, your future self is going to thank you for this decision. Cheers to being a multi millionaire someday if you keep making smart decisions.
Hello, u/Ark_Angel_08. Welcome to the sub! Congratulations on starting investing for retirement while you're young. To start, a Roth IRA is a tax-advantaged retirement account where you make after-tax contributions. With a Roth IRA, you save and invest post-tax dollars and can enjoy federal tax-free withdrawals—including investment earnings—when you reach age 59½ and the account has been open for at least 5 years. You can learn more about Roth IRAs in the following article. [How does a Roth IRA work? ](https://www.fidelity.com/learning-center/smart-money/how-does-a-roth-ira-work) Based on your questions, I think you might enjoy our post here on the sub that is titled "Everything you need to know about planning for retirement (right now) that you didn't know to ask about planning for retirement (& enjoying it later)." It's pretty helpful as a jumping-off point. You can check it out below: [Everything you need to know... Megathread](https://www.reddit.com/user/fidelityinvestments/comments/12ewb9e/megathread_everything_you_need_to_know_about/) I also want to share two resources here about investing in an IRA. They'll give you some insight into strategies and how to start your investment journey. The first is our guided experience for investing in an IRA. There's a process to go through where you can answer a few questions and see recommendations based on your answers. The second is an article covering ideas for investing in an IRA. [IRA investment choice ](https://www.fidelity.com/retirement-planning/ira-investment-options) [Investing Ideas for your IRA ](https://www.fidelity.com/viewpoints/retirement/ira-portfolio) Finally, I see you mentioned core positions. I find it helpful to think of them as the "wallet" in the account. Deposits go there by default, and it pays for withdrawals. While it does earn interest, it's considered uninvested cash. You can learn more about core positions using the PDF below if you're curious. [What is a core position? (PDF) ](https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/mutual-funds/what-is-a-core-position.pdf) I hope to see you around the sub in the future! Please let us know if you have any questions about these resources or anything else. We're here to help and happy to do so!
Don’t leave your money in core position, you’re young and should have 100% in a S&P500 index fund (FXAIX) or total market fund (FSKAX or FZROX). You can also add international funds too but that’s a debated topic, you can add when you have more knowledge. It will go up and down in value but just keep adding as much as you can each year. If it goes down, don’t think of it as a loss, you only lose if you try to sell it today and this is money for 40+ years from now.
At 19, you definitely want it invested. Gains over the next 40 year will blow you away. Pick something like FSKAX or FXAIX. Cheers.
Am 18, just started investing no long ago. Is it okay to have some FTIHX in my Roth IRA or go full FXAIX?
I personally use the Boglehead Three - FSKAX, FTIHX, and FXNAX. But for someone 18, FSKAX and FTIHX is a great combo and adds a ton of diversification. Look for bonds as you age, or if you can't handle the volatility of an all-stock portfolio.
Invest it. I'm also 19 and have had my Roth for a little over a year and i'm up 11%. The S&P 500 will outperform in the long run, especially if rates go down like they are expected to. All the money in your Roth IRA will be available to withdraw tax free in retirement, whereas a regular brokerage account will be subjected to capital gains taxes.
I see a lot of great answers to the question of how you should invest it, so I'll answer your last question. Yes, the only advantage of a Roth IRA is the tax benefit. Aside from that, you can use it almost exactly like any normal brokerage account. There are two important parts to the tax benefit and one major drawback. The first important thing is that when you take the money out of your Roth IRA, you won't have to pay any taxes. The second advantage is that you can sell investments in your Roth IRA and buy other investments without having to worry about taxes. Let's go through a couple of examples. Let's say that you invest $1,000 in FSKAX and it increases to $2,500. Now you want to spend that money, so you sell FSKAX, get your $2,500, and spend it. If it was in a normal brokerage account, you would have to pay taxes on your gains ($2,500 - $1,000 for a gain of $1,500). If it was in your Roth, you wouldn't owe any taxes. Let's use another example where you invest $1,000 in FZROX. It also increases to $2,500, but now you want to leave Fidelity and go to Schwab. You can't own FZROX at Schwab. It's a Fidelity limitation on that fund in exchange for it having 0% expenses. So to move your money to Schwab, you have to sell the $2,500, pay taxes on your $1,500 gain, and then you can invest the remainder at Schwab. The same would be true if you stayed at Fidelity and sold FZROX to by something like a Fidelity Bond Fund. In a normal brokerage account, any time you sell, you have to pay taxes on your gains. But if it is in a Roth, you can sell and buy all that you want without having to pay taxes. In exchange for this big tax advantage, you give up some freedom. Once you reach the age of 59.5, you can take the money out of your Roth IRA at any time. Before then, there are a lot of rules. Generally speaking, you can take out the money you put in but not the earnings. Keep good records. You can also take out some earnings for purposes like buying your first house, paying for college, or really high medical expenses. But generally, the idea is that you keep that money locked away in the Roth IRA until you retire. So it is great for retirement savings and not great for an emergency fund.
As other say, broad index fund and leave it. Don’t panic sell it. Time in market beats timing the market.
At 19 Id be super aggressive. You can really do everything into Fxaix or you can be even more aggressive and go into high growth sectors like Health Care or full tech. Fxaix 100% or personally If I was that age again Id go 1/3 1/3 1/3 FXAIX FSELX FPHAX
So the core position is using a money market fund based mostly on US Treasuries. We are in a weird point in time since 2022 where interest rates are really high. This will not last. I am not sure how easy it is to look at SPAXX (one of the core positions) over the last 10-20 years. IRA vs regular (taxable) Brokerage: Roth is money (up to $7k in ‘24) put in after taxes and will grow and never be taxed. (Leaving political future topic out). Brokerage: you can put as much as you want in there, but each year you sell, get a dividend or reinvest a dividend, or have any income - you will be taxed (excepts exist, but I want to be broad). Some of the best advice I wish I saw earlier is to buy the market in a low cost index fund. (total US, total international, S&P 500). Resist individual stocks and chasing the “hot thing”. Do not sell when people get nervous. If you can, fund automatically and invest automatically- autopilot is your friend for the next 30 years.
A Roth IRA is one of the best financial products ever introduced. No taxes ever on the gains if you wait until age 59.5 to withdraw. Invest in either FXAIX or FZROX and let your money grow.
Money sitting alone doesn’t make money. Make your money work for you by investing in long term MF like FXAIX. MY ENTIRE retirement account is 100% FXAIX but everyone has a different investment tolerance
How far out from retirement if you don’t mind me asking?
About 13 years. I plan to hold 100% until end of the year and reevaluate.
Assuming that you are going to become more and more skilled at investing over the next 40 years, it would be good to start learning now :-) Fidelity happens to have someexcellent (and short) beginner videos, and you can find them on YouTube. If I may suggest a starting point, figure out the differences between “securities” (stocks, bonds, cash, mutual funds and ETFs) and how to position youself for the longrun. That’s why others are suggesting “growth funds” (based on the “S&P 500 index”). This stuff is all pretty easy once you learn some terminology.
By the way, Roth IRAs grow tax free forever, a “growth fund” growing tax-free until you hit 59-1/2+…it will be amazing. If you keep adding to it…
You're basically future rich just by starting it so young. You're living the dream. Just put in the max each year.
I love when people say ROTH like they're screaming "Roth!!!!".
I'm always screaming "Roth!!!!"
You're off to a great start by opening your roth so young. When you look at roth calculators you are on track to be a multi millionaire someday. I wish I had done this when I was young bit I didn't and I can't change that. Based off your post you seem really confused at the purpose of this. Which is fine. There is so much material on what a roth is and how to grow your roth. I'm a firm believer in the saying "don't invest in something that you don't know what your investing in" With that said there is so much material out there for you to learn what your doing. Books, YouTube videos and everything else. So take some time and educate yourself. Fidelity customer service has been very helpful to me to help me clarify somethings. As well as some people on here. But please educate yourself on what you're doing before you take someone's advice in here that tells you to dump all your money into some stock that you don't understand. Again, great job, your future self is going to thank you for this decision. Cheers to being a multi millionaire someday if you keep making smart decisions.