There are several financial options that are the best ways to invest your money for the long term.Depending on your situation, there are details here to see if any of these three plans are sensible financial options for you: Roth IRA, Municipal Bonds,Stocks, and Mutual Funds.
A)Roth IRA-
Your eligibility for a Roth IRA is based on your Adjusted Gross Income, and whether you file your tax return as a single person or whether you file jointly. Your age enters into the eligibility requirements only by setting limits on your contributions. For example, in 2007, the contribution limits are $4,000 if you are under age 50 and $5,000 if age 50 and over. However, unlike a traditional IRA,you are still eligible to contribute to a Roth IRA if you are age 70 1/2 or older and you have earned income.
Your Adjusted Gross Income or AGI determines your eligibility to contribute to a Roth IRA. The AGI ceiling is linked to whether you file singly or jointly.
As a single filer,you are eligible to make a full Roth contribution if you AGI is less than $99,000. If your AGI is between $99,000 and $114,000, you can put a portion (with a gradual decline) of your contribution into a Roth IRA and the remainder into a traditional IRA account.
If you file jointly, your AGI would need to be less than $156,000 for 2007. You can make a partial contribution as a joint filer if your AGI is less than $166,000 for 2007.
With a Roth IRA, your earnings grow tax-free.
Although your contributions to a Roth IRA,are not tax-deductible, the contributions can be withdrawn at any time under certain conditions without penalty or tax. Earnings are free from federal tax if they are withdrawn after age 59 and the account has been open for more tan 5 years.
B) Municipal Bonds
Municipal bonds can be a good investment, depending on the economic health of the city, county, or state governments that is issuing municipal bonds for major building major projects for their locality such as schools, highways, hospitals, and other such projects.
Municipal bonds look good to the investor because these municipal bonds are tax exempt when it comes to federal taxes and can be free of state taxes if bought in the investor’s own state . Such municipal bonds may even be tax exempt when it comes to personal property tax. Certainly, if you live in a high tax state, such an investment will be particularly advantageous.
Municipal bonds may also be a good plan because of the relative safety of this kind of investment.Investors may have personal interests in a particular bond because those improved roads or schools may indirectly benefit their other business concerns.
There are two categories of municipal bonds, both based on the type of collateral that is used to establish them. These two types are General Obligation bonds and Revenue Bonds. General Obligation bonds, with the appealing nickname of GO Bonds, are backed by the fact that city, county, or state has the advantage of being able to raise revenue through taxes.
Revenue municipal bonds are offered by an entity at the city, county, or state level. A utility company such as a water company is a good example of such a revenue municipal bond. That utility, that business, has an obligation to pay the interest and does so from the revenues that come in from the business. In this case, the income is generated as customers pay their water bills. The bond holders are paid from this revenue.
Important Things to Know:
1. Research-Get information about the bonds offered: 1.) Who will be servicing the interest payments on the bonds, and 2.) What is the economic health of the issuing city, county or state. Factors contributing to good economic health are whether the state or local government, as a community, is prospering and growing, has diversity, can show a solid payment history on prior financial responsibilities, and currently has a population of at least 10,000 residents.
2. Reciprocity Agreements- Look at neighboring states, cities, or counties. Perhaps a neighboring state, city, or county has developed reciprocity agreements. Such a reciprocity agreement may make bonds from these neighboring jurisdictions available on a tax-exempt basis as well.
3. Changing Interest Rates -Changes in interest rates affect municipal bonds. If the current interest rates go down, investors will benefit by an increase in the value of their bonds. The flip-side is also true, so factor that possibility into your decision.
C) Stocks-
Invest for the long term by developing a diversified portfolio of varied stocks.-
This is a better strategy than simply trying to buy low and sell high
Check into companies that sell shares directly to investors, thereby bypassing commissions to brokers. While you are at it, look at their dividend reinvestment plan.
D)Mutual funds. With no-load, you have no sales commissions to pay and by investing a small amount on an established schedule of a compatible blend of investments, you can get moving safely in the world of long-term investments. The strategy is safety that pays well if you can invest for the long-term.
Here are some important tips about investing:
1) Work only with established firms with well-know, favorable reputations.
2) Understand your investments so you can be an informed buyer and seller.
3) Investigate the companies you are thinking about dealing with.
4) Investigate stocks and mutual funds- The National Association of Securities Dealers (800-289-9999; www.nasd.com); ask for the Central Registration Depository Report on the broker or contact securities regulation office in the state where your prospective broker is working.