I am an Ultra-Conservative, Alpha-Male, True Authentic Leader, Type "C" Personality, who is very active in my community; whether it is donating time, clothes or money for Project Concern or going to Common Council meetings and voicing my opinions. As a blogger, I intend to provide a different viewpoint "The way I see it!" on various world, national and local issues with a few helpful tips & tidbits sprinkled in.
Want to hear a mind blower! If I were allowed, I would make annual contributions into a Roth IRA for my child. If I put in $5000 per year until she turned 18 and if we got an average of 10% return, she would have $238,972. At that point, I would quit contributing and the money would continue to grow (assumed 10%) for the next 43 years until she reaches 65. At 65, she would have $17,301,157 in her retirement account just from what I contributed! I did state, “If I were allowed” because current law does not allow you to invest in a Roth for someone without earned income. Seems stupid to me, as money that goes into a Roth is after tax money! Yes, I paid the taxes already, so why shouldn’t I be able to help my child?
I would hope that I could teach her well enough that she would continue to invest the $5000/ year till she reaches 65 and she would have $30,868,446!!
Again, current law does not allow you to invest in a Roth for someone who does not have earned income. This means that she must wait to start her Roth. So, if she starts at age 18 till age 65 or 43 years contributing $5000/ year and still assuming an average return of 10%, she would have $3,409,233. I wish she could have the other $26.5 million!
Here are more things to keep in mind. First, saving for YOUR future is not that hard for most. To save $5000 / year you would need to deduct $208.33 from each of 24 paychecks. But you don’t pay taxes on this money so your take home should be reduced by about $125. OK, sounds like a lot, but it gets better! Tighten the belt a little and soon you will be used to the new paycheck and the next time you get a raise, some of the hurt goes away. After a couple raises you will be back to your original take home and enjoying the results on you investment statements.
Some employers also do some sort of match to your contributions. If you are not getting the maximum amount from you employer, then you are giving up free money!
Understand the importance of ongoing saving of money for your future. You must be in it for the long run. I know people who cashed out their 401k money the last time we were in an economic downturn and quit making their regular contributions because they were worried about how much money they had lost. So they got their money at its lowest value (low stock price) and paid taxes and paid a penalty and quit buying shares at a relative bargain price. When the market came back all my newly purchased “bargain” shares went up as well and I have far more value than I did before the downturn. I don’t need the money for another 20 years, so as the markets fluctuate so will my nest egg, but in the long run the long-term investor will be set for their future.
Is there a subject you would like me to write about?
I am open to suggestions. I have received many in email and will as always keep the names secret. If you didn’t see yours yet, don’t give up. I will have it soon. I have written about two months worth already.
I try and mix up the topics so the blog is not one dimensional. I have an order mapped out that I try to follow unless a topic is time sensitive, at which it might be squeezed in or pulled out. I try to make sure those that flow in order follow the order.