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Sunday, Dec. 2, 2012, 8:51 p.m.
 

Q: I'm 24, married with a child and in medical school. Thanks to my wonderful parents, I will graduate with no debt. I'd like to start saving for retirement now. I don't have a job, so I can't use a 401(k) or Roth IRA. Is there another account I could use that wouldn't be taxed, and how should I invest?

A: Congratulations for thinking ahead. With Social Security and Medicare threatened, your generation is going to need to do more saving for retirement than the previous one. So starting now — even if it's just $5 a week — will help tremendously.

A 24-year-old who invests just $5 a week in a stock market index mutual fund and keeps it up year after year should have more than $130,000 by retirement. Investing $20 a week should provide more than $500,000 by retirement. Yet a person who waits until age 45 to start saving is not likely to accumulate $500,000, even by investing $150 a week. Try it with this calculator: http://bit.ly/cSYagW.

You are wise to want to invest in a 401(k), Roth IRA or another account that is not taxed. Your money accumulates much faster when you aren't giving part of it to Uncle Sam each year, and the two accounts you mentioned do keep the taxman away.

But as you point out, you are not earning money now, so — on the basis of your income — the Internal Revenue Service won't let you open an IRA or Roth IRA and shield your savings from taxes.

You might have an option to keep Uncle Sam away.

Even though you are not working, you can open a Roth IRA and contribute up to $5,000 this year if your spouse has a job or business and is earning $5,000 or more a year at work. Your spouse can also open a Roth IRA and contribute up to $5,000, provided his/her income from working is high enough to cover the contributions.

In other words, the two of you could be saving a total of $10,000 this year in accounts that will never be taxed. Roth IRAs are not taxed if you leave money invested in them until you are at least 59 12 years old. If you have $500,000 at retirement, it will be yours free and clear if it's in a Roth. If it's a million, $3 million or any amount, the money in your Roth will be all yours — free of taxes — unless the government changes the promises it has made.

Next year, with your spouse working, you two can put away a total of $11,000 in Roth IRAs. That's $5,500 for each of you. In 2013, the government is raising the maximum contribution for Roth IRAs to $5,500 per person.

If you and your spouse don't have jobs, you won't be able to shield your money from taxes in an IRA. But unless you have received a huge inheritance or other gift of money, you probably won't have to worry about taxes until you have a job.

Then you can start saving regularly in a 401(k) at work, and you can open Roth IRAs if your income is within the limits — currently $173,000 for a couple contributing $5,000 each.

Meanwhile, you can get started saving in a taxable account. Keeping your fees low is important. So consider going to a mutual fund company such as Vanguard, which is known for low fees. If you invest in an index mutual fund, your fees will be very low.

Gail MarksJarvis is a personal finance columnist for the Chicago Tribune and author of “Saving for Retirement Without Living Like a Pauper or Winning the Lottery.” Email herat gmarksjarvis@tribune.com.

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