5¾ Reasons You Need a Roth IRA NOW

You like money and want to retire someday, right?  If not then go sit in front of the TV and tune out for the rest of the day.

The deck is stacked – - both ways.  On the one hand you have $4 gas, mortgages foreclosures, a turbulent stock market, and unemployment on the rise (yikes!).  However most of us won’t change our driving habits until gas hits $8 per gallon, young college graduates live at home or in an apartment, and don’t own any stock or at least not enough to make us rich or poor when the market fluctuates.

Here’s the beautiful part, the most valuable secret you will ever learn.  Get a pen and paper then write this down: Compound Interest.  That’s right, your most treasured asset right now isn’t a weekly paycheck, your Sony Playstation, or the flatscreen TV…it’s time.  Given enough time you will retire a millionaire and all it requires is some patience, a modest amount of money to invest, and the ability to see the bigger picture.

Set up a 401(k) with your employer IF they offer a company match and only contribute up to the amount they match, hell it’s free money and you’d be a fool not to take it.  However when you retire the money invested in these funds are taxed.  For young people that means your money goes in untaxed while you are supposedly in the lower tax brackets and comes out getting taxed at the higher tax bracket you have graduated into over the course of your entire working life (you still come out ahead, but there’s a better way).

Start up your own Roth IRA today, right now, this instant.  I opened mine with $1000 and most can be started with less.  Then every month drop whatever you can into the account (here’s a tip, have the money automatically removed electronically from your bank account each month so you won’t even miss it).  The maximum amount you can invest is $5k per year, roughly $416 per month.  If you can do this from the age of 25 until retirement there will be a cool $1.4 MILLION waiting for you at the end of your working life…TAX FREE!

Tax free money is nearly unheard of today.  Add the fact that you contribute after tax dollars right now while you are in a lower tax bracket (younger, less earning power) than when you retire (older, much more earnings, meaning higher tax rates) and this is a once in a lifetime opportunity.  Once in a lifetime because if you wait too long the power of compound interest is lost forever.

This is a lot to cover.  Leave a comment or shoot me an email with your questions.

Here’s some ‘homework reading’.  Enjoy!

Why You Need to Start Now

Vanguard Roth IRA

All Your Financial Questions Answered