How does a roth ira earn money
Best Answer: In General:
Here is where I try not to look like I am sucking up to the Yahoo people and say check out the Yahoo personal finance section (see below). It has TONS of good basic advice and calculators for questions such as this.
To your question:
One of the posters had a good analogy, i.e. the shopping cart, so let's address the other questions.
"how much approximately could I expect at retirement?"
--It depends on how much your saving earn. At a conservative 8%, saving $3000 per year for 30 years will give you about $350,000. A more realistic 10% return (think stocks) will give you about $500,000 for the same invested amount. As you can see, 2% difference means a LOT in the end.
"how does it gain money?."
--It gains money depending on the type of investment.
Bonds= get mony from interest payments.
stocks=money from increased value and/or dividends (dividends= a tiny share in the profits that the company makes, but only if the company makes a profit)
mutual funds= a large pool of money from lots of
people that holds large amounts of stocks/bonds/ other investments
With all investments remember this ONE thing: risk=return
If someone promises you a 20% yearly return, that is either a scam or a VERY risky investment.
There is MUCH MUCH more to it, so take the time to read the personal finance section.
I am studying for a masters in accounting, have taken tons of courses in finance, and still find good ideas there.
Find someone who answers a lot of questions like these, click on their picture here, and follow that to other questions they have answered. You are not alone in wondering how to start, and the people who give good advice will be fairly obvious. I do this sometimes when I find someone who gives good advice.
If you have any other questions, feel free to ask them here. Your next question should be: "What kind of mix of investments should I have?" and this topic has also been addressed here and on the Yahoo finance section.
Yahoo retirement calculator that will tell you how much you will need to save for your retirement:Source: answers.yahoo.com