LESSON ONE - Retirement Accounts like the IRA and 401K!

Some people will disagree and say you should focus on paying down debt first. But the best way to build ridiculous wealth is by continuously saving money via Ira's and other retirement vehicles such as 401K.

The reason I say you should first fund these type of accounts is because you can NEVER retroactively make a deposit. In other words, if you did not make a contribution in 2005, you can never go back and make a contribution for that year. It will forever be an opportunity LOST.

An IRA allows you pre tax to save up to $5,000.00 per year in a tax deferred account. A ROTH IRA allows you post tax to save the same $5,000.00, the advantage to the ROTH is it allows the funds to grow tax free forever.

A 401K is an employer offered retirement savings account that deducts a set percentage of your salary pre tax up to a maximum of $15,500.00 per year.

Now, let me show you just how much small contributions accumulate over the years. Say in 2008, you save $1,ooo.oo, in thirty years, assuming 8% returns per year, that $1,000.00 will have grown to $9,317.00. Over 40 years, $20,115.00.

So you can see the value of getting started early. Now obviously if you do this year after year, at retirment you will be quite wealthy. Now just imagine if you do the full $5,000.0o or idealy the full $20,500.00 by doing both the ira and the 401K.

$5,000.00 a year is not even $100 per week.

So you have decided to start, begin by opening an account with ETRADE or another online broker, www.etrade.com, www.troweprice.com, are great place to start. Until you have accumulated $2,500.oo the best thing to do is open a money market within the IRA until you accumulate enough to purchase your first fund. My recommendation is if you are under 40, begin by accumulating your a SMALL CAP FUND. These funds on average return over 12% a year over long periods of time. You can then add a fund that tracks the S&P 500, International Fund and a Bond Fund. I believe this mix until you reach five years of retirement should be 50% small cap, 20% s&p, 20% international, and 10% bond. This will give you an adequate mix.

In general, I am not in favor of holding individual stocks within your retirement accounts unless you have already saved a substantial amount of money. Individual stocks offer too much risk relative to a fund which holds a basket of stocks.

The goal here is not to hope you become a millionaire through obscene risk but rather to slowly over time build wealth.

Good luck as you begin the road to WEALTH.