$3,000--save or invest?

[stout]

A family member asked for ideas on what to do with $3,000.
All debts are paid off. Family member is single and rents with a very low monthly expense. Person is in low 30s. Has about $10K in Roth, current employer doesn't offer retirement plan--no contribution made in 2012 or 2013.
Emergency fund of three months already in savings. Is able to save about 25% of net income now that debt is paid off.
Family member is has a new job starting in April (slightly better income), but will not be eligible for employer sponsored retirement account for one year.
Wondering if this person can do a traditional IRA contribution for 2012 tax year, before April 2013, to see a tax benefit. Sounds like the answer is yes, given no employer sponsored plan and under the income limits. However, my next question is can this person then convert the traditional IRA deposit to a Roth, or would that defeat the tax benefits gained by contributing to a traditional IRA?
Otherwise, would it be more advisable for this person to contribute to a mutual fund or something?

 

[robsmom]

You will gets lots of opinions on ira's and roth ira's and whether to convert. It comes down to if you think the taxes are better now or later and if you expect to have alot of growth that would be nontaxable. To me the question is, what are this person's goals. Does he/she want to buy a house some day, plan to get married etc. Putting the money in retirement indicates that he does not want to spend it in the next 30 years. I think at this age, some investment/savings in regular taxable accounts that can be accessed to someday buy a house or pay for a wedding or other major purchase would make the most sense.

 

[ilovemk76]

A family member asked for ideas on what to do with $3,000.
All debts are paid off. Family member is single and rents with a very low monthly expense. Person is in low 30s. Has about $10K in Roth, current employer doesn't offer retirement plan--no contribution made in 2012 or 2013.
Emergency fund of three months already in savings. Is able to save about 25% of net income now that debt is paid off.
Family member is has a new job starting in April (slightly better income), but will not be eligible for employer sponsored retirement account for one year.
Wondering if this person can do a traditional IRA contribution for 2012 tax year, before April 2013, to see a tax benefit. Sounds like the answer is yes, given no employer sponsored plan and under the income limits. However, my next question is can this person then convert the traditional IRA deposit to a Roth, or would that defeat the tax benefits gained by contributing to a traditional IRA?
Otherwise, would it be more advisable for this person to contribute to a mutual fund or something?

Put it into a 2012 ROTH and then start saving in the 2013 ROTH when the new job starts, sooner if possible.

 

[HM]

Buy a CD or Municipal Bond?

 

[Marionnette]

A family member asked for ideas on what to do with $3,000.
All debts are paid off. Family member is single and rents with a very low monthly expense. Person is in low 30s. Has about $10K in Roth, current employer doesn't offer retirement plan--no contribution made in 2012 or 2013.
Emergency fund of three months already in savings. Is able to save about 25% of net income now that debt is paid off.
Family member is has a new job starting in April (slightly better income), but will not be eligible for employer sponsored retirement account for one year.
Wondering if this person can do a traditional IRA contribution for 2012 tax year, before April 2013, to see a tax benefit. Sounds like the answer is yes, given no employer sponsored plan and under the income limits. However, my next question is can this person then convert the traditional IRA deposit to a Roth, or would that defeat the tax benefits gained by contributing to a traditional IRA?
Otherwise, would it be more advisable for this person to contribute to a mutual fund or something?

You can contribute to your retirement account up until Apr. 15 and still take the tax deduction for the previous year.

TBH, I think your relative's retirement account is looking a little anemic for a single person in their early thirties. If this were my child, I would be advising them to put the money into their retirement account...or at least the majority of it. Traditional IRA vs. Roth is up to them, but there is no tax deduction for investing in a Roth. The idea is that you're paying the taxes on it now instead of when you're retired. We actually have both.