What about a recharacterization of a roth to a traditional?

I have a part-time job right now, but I might not have a job when I graduate. If I do not have a job after opening a Roth IRA, is it still okay to have a Roth IRA?

• I am a college kid paying $634 a month for a year of rent. I plan to have that lowered to $500 for a single semester. I plan to open a Roth IRA, I know that after I withdrawal my savings it will be tax-free. I just read that within the Roth IRA; I should invest in growth, aggressive growth, growth and income, and international. After college, I will (hopefully) avoid debt, and I will have a few thousand dollars in my bank account. I plan to take part in a non-profit adventure over the summer, so I will not have any job during the summer. My questions are: 1. What is the recommended contribution minimum for a Roth IRA? 2. I have a job now and I plan to open a Roth IRA soon. But when I am out of college, I will not have a job. What happens if I can't make a minimum contribution? 3. What should I do with the money I have saved now?

• Answer:

  The Roth IRA is the smart way to go.  Your marginal tax rate is low now, so investing in post-tax contributions is fine.  But when you get a full time job and start earning more you might consider moving future contributions into a tax-advantaged 401(k), if your employer offers one. I'm assuming you have no consumer debt.  If you have a balance on credit cards, a car loan, etc., it is better to pay those down first.  Let the interest rates be your guide.    What's the best use of $100, earning 10% in the stock market or paying down a credit card that is charging you 14%? And don't forget to build up some emergency savings that you can quickly accessed.  Ideally enough to live on for 6 months.  Even though you might have it sitting in a savings account earning essentially nothing, if an emergency comes up it will allow you to avoid credit card debt that would be very expensive.  Maybe your existing savings is good for an emergency fund? Look at the whole picture of your finances, not just retirement.  A recent report showed that Americans were accumulating debt (mortgages, consumer loans, etc.) faster than they were saving for retirement. How much to save for retirement?  10-15% of your income is a good target.   And the earlier you start the better.  Of course this is all predicated on having income.  In general, having a job is beneficial to retirement planning ;-)