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For whatever reason, I find talking about Roth IRA’s boring. Nevertheless, they are an unbelievable way to amass great wealth. To minimze the disomfort of talking about the subject, I’m going to give you the Cliff Notes Version.
Background; I’m one of those finance nerds who started investing in my 20’s and have not stopped. I was decades younger than the other attendees at my first retirement investing seminar. When a way to invest and save taxes came up, I dove in! Thus, as soon as self directed IRAs became accessible, I started contributing the max. When I met El Carino in my mid-20’s, after just a few months of dating, I got him to contribute to an IRA as well.
This article will tell you why you must contribute to a Roth IRA and how to do it.
WHAT IS A ROTH IRA?
According to Money Chimp a Roth IRA is a tax advantaged investment vehicle which allows your money to grow over the long term and only get taxed one time! You put money in an investment account after taxes, invest it in your preferred investments, and pay zero taxes as the money grows and zero taxes when you take the funds out!
That’s correct, you pay no taxes at retirement when you withdraw the funds.
HOW MUCH COULD YOU EARN?
Put $5,000.00 in an investment account once every year from ages 25 to 65.
Invest in 3 funds:
40% in Vanguard Total Stock Market Index Fund (VTWMX)
40% in Vanguard FTSE All World ex-US Index Fund (VFWIX)
20% in Vanguard Total Bond Market Index (VBMFX)
Earn an average return of 7% over 40 years.
At age 65 your investment account will be worth $998,175.56
When you withdraw the funds, you pay zero taxes.
HOW TO SET UP A ROTH IRA?
Contact a discount broker such as Vanguard, Fidelity, Charles Schwab, Etrade, or other.
Either on line or by phone, follow the required steps to set up the account.
Transfer money into the account either directly from your bank account, paycheck, or mail a check (very old school).
Choose the funds and indicate your preferred percentage for each one. Instruct the brokerage to transfer this money and future contributions into your funds.
WHAT IF I DON’T HAVE $5,000.00 PER YEAR TO INVEST?
No worries. Invest any amount you can. Start now, and set up an automatic transfer every month. Increase the amount as your income grows. Check out an online calculator to find out how quickly even small amounts can grow into large sums over time.
Holding Cash is Not a Sin at Morningstar.com by Liana Madura.Even big time fund managers hold cash in their portfolios. It may be your best move on occasion.
How Much Money is Actually Enough in More Magazine is one of those articles that really inspired me. It changed my perspective and allowed me to loosen some of my negative money thoughts. Read it to be uplifted.
Wealth Informatics asks, Is Gift Giving a Waste of Money? My charity contributions are automated quarterly through Charity Navigator. No muss, no fuss. What do you think of Wealth Informatics approach?
This is a recommend as well as an article where I’m mentioned 🙂 ; Best Tips for Fixing Your Finances, by Donna Freedman over at MSN Money. This article is jam packed with stellar personal finance recommendations from the best money minds on line. If you are looking to learn more about money, you’re certain to find a resource here.
Priorities by Jason, at Live Real Now got me thinking about my own. This article reminded me that the difference between success and failure is putting limited time towards the most important tasks. While you’re there, don’t forget to enter his 2nd year GIVEAWAY.
The Three Stages of Financial Freedom at Invest it Wisely, also got me thinking. Let this article prompt you to consider what financial freedom means in your life.
The Reasons I Like Money Over Gift Cards at Money Reasons. This article echoes the belief of Clark Howard renowned saving guru. Give money and you can be sure it will not go unused.
20s Money writes about why the Outlook is Not Good for 20 Somethings. As a worrier, I tend to get fraught with concern about future generations. This thoughtful article talks about the perils ahead for the Gen Yers.
The 30K Online Challange at 20s Finances drops down the gauntlet for others to participate in this money making competition. Are you a blogger motivated by competition? If so, why not join in?
Barb Across the Blogosphere
FindtheBest published, Should You Buy Investment Products at Your Consumer Bank?
Free Money Finance published Dividend Investing is Not the Perfect Solution for Investing
Benzinga Brain Trust Column, Are IPOs worth the Risk?
Emily from Creditcards.com mentioned my Pro Shopping article
What type of retirement accounts are you using? What asset allocation do you prefer?
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