Quick, How Do You Spell Rich?
Picture this: You’re 16 and you’ve just gotten your first job. Or maybe you’re fresh out of college and are getting started in your chosen field. Or heck, maybe you’ve been working for a while.
What do you all have in common?
Earned income — which means you’ve also got the potential to become rich.
So quick, how do you spell rich?
R-O-T-H.
A route to wealth
That right, a Roth IRA can make you very wealthy — IF you take advantage of it.
So what the heck is it?
Just a name for a special way to treat your retirement funds. Think of it as a “the government’s going to let me keep my money” fund. Or a “someday I could buy a few Ferraris with that” fund. Whatever appeals the most to you.
Here are the key advantages of saving for Ferraris retirement using a Roth. According to the IRS:
- If you satisfy the requirements, qualified distributions are tax-free.
- You can make contributions to your Roth IRA after you reach age 70 ½.
- You can leave amounts in your Roth IRA as long as you live.
I added the bold, because hello, that’s what helps you end up with a ton of money. The others are real advantages too, but hard to fathom because they’re so far away.
The takeaway
If you don’t have a Roth, call up someplace like Zecco, see if you qualify, and start one today. If you or your child who makes money are under 18, call up someplace like Scottrade instead, because they offer Roth IRAs for minors. Then send money to it regularly, and leave it there until you’re very, very rich.
Wish I would have started my Roth IRA at 16 instead of 21, oh well!
21 is still so great! I didn’t start my Roth until I was 40.
I had no idea you could open a Roth for minors – my kids are nowhere near earning money yet, but it’s great to know a Roth will be an option when they are!
Yup you sure can! I opened one for my son while he was a minor. As long as they have earned income you can contribute to it.
Is this the same as Superannuation in Australia? We have a scheme here called the super co-contribution scheme where the government will match up to $1000 of personal contributions.. free money! Haha
Based on my quick read on Superannuation on wikipedia, I’d say no. Superannuation is probably more similar to people in the US getting a match on money they contribute to a 401k, but the matches are not compulsory. All of the money you put into a Roth is yours, and what comes out is yours plus anything you’ve made from investing that money.
Good thinking here, though I have to say that Roth IRAs didn’t exist when I was 16. That said, I was literally just thinking about when my daughter will begin thinking of saving in earnest. Too young now :)
Same here! But your daughter could start at any age once she has earned income — even if that’s from modeling or something…
Tax-free is definitely the most important part about a Roth IRA! I want to throw out a suggestion of ING as a great place to open one – it’s really easy.
Yup, and opening one should be easy no matter where you do it :)
I’ve been using a Roth every time my income drops into the lower tax brackets, otherwise I’m using a regular IRA. As long as I’m putting money into one of them it’s been a good year.
Are your regular IRA contributions deductible?
So far I’ve always gotten a deduction. The goal is enough income so deductions aren’t an option.
An excellent goal :)