Personal Finance: Planning for old age even before graduating

Question: 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?

Answer: 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 generation. 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 isn't likely to accumulate $500,000 even by investing $150 a week. Try it with this calculator: http://bit.ly/cSYagW.

You aren't earning money now, so - on the basis of your own income - the IRS won't let you open an IRA or Roth IRA and shield your savings from taxes.

Yet you might have an option that will keep Uncle Sam away anyway.

Even though you aren't 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 aren't taxed if you leave money invested in them until you are at least 591/2 years old. If you have $500,000, or any amount, at retirement, it will be yours free and clear if it's in a Roth - 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. At that time, you can start saving regularly in a 401(k) at work and you can also 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. Index funds also tend to be tax-efficient, so if you end up being subject to taxes at some point, index funds will keep your taxes lower than other mutual funds.

A simple way to get started investing is to invest in what's known as a target date fund, or a target retirement fund.

To get started at Vanguard you will need $1,000, but a few firms, such as T. Rowe Price, will let you start with $50 if you promise to add another $50 per month.