how to: invest your money

Saving money and learning about investing is always a smart plan. Even if you’re newly hitched, it’s never too soon to start planning for those golden years. Think about it: Do you imagine yourselves lying on a beach or working behind a desk? If you picked the beach (or travel, or golf, or anything other than the 9-to-5 grind), you’ve come to the right place. We have all kinds of investment advice, including the basics of how to invest wisely and what all those financial terms really mean. Not sure where to begin? Start with our five easy steps to invest your money. We also have investing advice and Q&A on all kinds of financial basics about investing -- learn the difference between a 401(k) and an IRA, how to invest your savings, and your options if you can only invest a small amount. Our basic investing advice will help you get ready. But before you invest your money, you should be sure you’re out of debt: Use our debt calculator to help plan your payments, and follow our simple steps to go from credit card misery to debt free. And if your problem is a lack of cash, we’ve got tips for you, too. Learn the habits of spending-savvy couples, and find easy ways to save more of each month’s paycheck and stick to your budget. Don’t want to go it alone? Check out our local pages to find a financial planner in your area for some in-person investment advice.

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Money Q&A: 401(k) vs. IRA?

Q.

The Nest Q&A What's the difference between a 401(k) and an IRA?

A.

A 401(k) is a pension plan set up by your employer to which you contribute from your earnings (you'll pay taxes when you withdraw from the account but get the immediate benefit of investing with pre-tax dollars). Many companies offer matching contributions up to a certain amount -- yes, free money! In 2009, you can contribute up to $16,500, and there are penalties if you withdraw cash early.

Individual Retirement Accounts (IRAs) are private retirement funds set up at a bank or other investment brokerage. If you don’t have a 401(k), you can contribute up to $4,000 yearly and claim a tax deduction on your annual return. You're allowed to contribute more, but the law requires you to pay taxes on the amount first. The money grows in the investments you choose, and when you reach age 59 1/2, you can start taking out the money without penalty, paying taxes on any gains.

A Roth IRA is related, but different. You're allowed to contribute up to $4,000 per year as long as you pay income tax on the money, but when you start withdrawing after age 59 1/2, you don’t pay taxes on the gain. But if you and your spouse's annual gross salary is above $160,000, you're no longer eligible and should opt for a traditional IRA.

-- The Nest Editors

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