Comments on: A Fully-Funded Roth IRA At Age 18 Could Net You 3.5 Million Dollars

By: Mike

Mike — Wed, 04 Jan 2012 22:44:05 +0000

Is this a possible scenerio? Let’s say that I’m retired and grew my Roth IRA to $1M. I use that $1M to purchase a stock and then sell it after it has gone up 1% for a $10k profit. Can I withdraw that $10k profit without paying any taxes on it?

By: Beezer

Beezer — Wed, 07 Dec 2011 13:45:54 +0000

Mike, you have to remember something, that figure of $48,864 yearly, for probably most people investing in a roth is not their only retirement income. If I am lucky enough to reach that amount and i stay at my current job at my current salary level I would be pushing 90k in combined income. with the Roth and my pension, i also qualify for alittle social security( if it lasts that long :p lol)

By: Mike

Mike — Sun, 30 Oct 2011 09:11:52 +0000

P.S.
Btw – I think I read somewhere that the avg. annual return rate over the life of the S&P 500 was somewhere around 8% if i’m not mistaken. Personally, people can do much better if they do a little homework and build a aproportionate size portfolio of high growth stocks and use good money management. 15% is certainly attainable. Like I said, do some homework. Don’t just put it in the S$P leave it there. Put your money in companies that are growing at a fast pace. S$P companies are good and offer stablility and divs but the longer a company has been around the slower their earnings growth and price movement. Divs don’t compare with good price movement.

Also, here’s a real eye opener: the $$ contributed in the early years of an IRA’s existance makes the biggest impact over the long haul due to compounding interest and time and the money contributed later makes the least impact. So when you are young, work hard and save!!,, be a little more risky because you have time on your side and less $$$ to lose and most of all because getting a large starting balance in the first 5 years of a 40-50 year account makes a bigger difference than yearly contributions for the remaining 35+ years! It is true. In other words, after your account reaches a certain size your contributing your “max” contribution “every” year will NOT have a significant impact on the final ending balance and you can even competely stop contributing if you choose to! At that stage your yearly contribution will be merely small change compared to the interest you make on the account. It’s true because the compounding “avg. annual return rate” you achieve and “time” become the power that drives the money machine not your yearly contributions! With this important knowledge it is critical that an IRA be fully funded from the START and the sooner the better.

By: Mike

Mike — Sun, 30 Oct 2011 06:11:28 +0000

However, remember that little thing called inflation. Annually compounded at a very hopefull 1.5% average annual inflationary rate over 54 years is 0.015*54=0.8 $3,674,000 – (3,674,000 * 0.8) = $698,060 in today U.S. dollars. Now, this isn’t bad but you have to now figure on only getting an avg of 7% annual ret. on a fixed income fund vehicle of choice and that earns you $698,060*.07= $48,864 yearly income in todays US dollars. Not great, but liveable considering your home is probably paid off and children gone. But also bare in mind that the investor better know something about investing to get and 15% avg. return rate over 54 years! 9% is more realistic.

By: Cat

Cat — Thu, 06 Jan 2011 23:07:44 +0000

About Anonymous’ comment that inflation could take a 3.5 million dollar return and change it into 700 thousand dollars, it was 5 thousand dollars initially that created that 700 thousand dollars. If I had to choose, I would give my 5 thousand dollars to make it 700 thousand dollars any day! Wouldn’t you? Complaining that it’s not 3.5 million dollars seems pointless. The alternative is either to invest your 5 thousand dollars or have it de-value over time, due to inflation. Investing is a wonderful way of having it keep its value over time and even add more to your wallet (way more)!