This is something that I've wrestled with as well, and it's kept me from starting my retirement fund. This is probably a dumb question - but are you/can you lose your principle with a Roth? Like say I start out with $1000. With the market tanking am I potential losing money every month and after a year I've only got $900 in my IRA?
Yes. Risk and reward are irrevocably tied. If you want big potential gains, you risk big potential losses.
I was setting up a Roth IRA account online with T. Rowe Price, but got frustrated with it. It wasn't clear to me which fund I could choose from was an index fund. And the current interests rates on almost all the accounts were negatives. Wouldn't I be better off just putting my money in a CD or something for the next couple years? Or maybe saving a small percentage for retirement and throwing the rest at my student loans, if the equation is get negative interest on my money vs. pay off loans at 5%.
First, you need to stop thinking of it as interest, because it's not. It's growth (or negative growth). As for what you're better off doing, that's a personal decision, based on your risk tolerance. Some folks here advocate paying off debt at all costs, and I can't argue with the notion that this is a guaranteed return. Other folks will argue that the long-term growth of stocks is unbeaten by any other investment and with regard to IRAs (Traditional or Roth), every year you pass up investing is a year you can never get back. Personally, I think the right answer varies depending on the nature of the debt (whether the interest is tax deductible or not, etc.), the size of the debt, the interest rate, your income, etc.
So rather than just give you an answer, I'll direct you to read The Full Story
from Transparent Investing. It's an easy and relatively short (about 53 pages). It will help you understand the risk/reward relationship, which in turn should help you feel better about where you should be putting your money. It won't address your debt (it's about investment, not personal finance overall), but your risk tolerance should tell you that. Just remember that what you'll get out of the paper is that you can't time the market
. It's fine if you want to put your money toward debt repayment rather than investment, but doing so because the market is bad right now and might get better later is the wrong reason
. You don't know if the market will stay where it is, go down or go up in the near term. All you really need to figure out is whether you'd rather pay off debt now or invest. The actual movements of the market aren't relevant because you can't predict them.