IRA Rules

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Suze Orman at Google

Question: is there a time limit on any of these?

mutual fund
IRA (both)
Bonds
CD’s
401K
Rule of 72…what is that anyway? or
Compound Interest? whats that?

Answer: IRA account have several different time limits to be considered.
1. time limit for making a deposit for the year–April 15 of the following year I think.
2. time limit before you can begin withdrawing funds without penalty 59 1/2.
3. time lime by which you must begin withdrawing funds 70 I think.

Bonds. All bonds have a maturity date at which time they stop paying interest and return your capital.

CD’s All CDs have time limits specified at the time you purchase the CD after which they no longer pay the specified interest. The time limits vary from CD to CD.

Mutual funds normally do not have time limits.

Compound interest: If you invest $100 at an interest rate of say 10% and the interest is compounded, at the end of the 1st year, you will have $110 which will then also earn interest at 10%. So at the end of the second year you will have $121. You see your interest has earned interest and over a long period of time it can make a gigantic difference in your returns.

Rule 72 is a mathematical trick to figure how long it will take to double your money with interest compounding. The number of years is 72 divided by the interest rate. 7.2 years at 10% interest. 14.4 years at 5% interest.

Some mutual funds over a long period of time have returned better than 13% annual interest. At that rate you double your money 5.54 years. Four fold increase in 11+ years. 16 fold increase in 22+ years. Wow!

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