Day 24: Roth IRA
I opened two Roth IRAs last year – one for my wife and one for me – and I fully-funded them both for 2006 and 2007.Â Contributions to a Roth IRA grow tax-free – because all contributions are made with after-tax income.Â So, what if I invest $4000 (this year’s contribution limit) every year for the next 25 years, and I average an 8% return on my investments?
After 25 years, I will have contributed $100,000 dollars – but my account balance will be over $315,000.Â Not bad.Â If you are thinking about retirement, and you are eligible to make contributions, may I suggest that you consider opening and fully-funding a Roth IRA?
Please note:Â I realize that the actual return on my investment will be greater than or less than 8%.Â I simply picked a number and went with it.Â The market could go up by much more than 8% OR it could go down by much more than 8% – but I think that the historical data will support that 8% is a reasonable figure.
If you have written a post about Roth IRAs, contact me and Iâ€™ll be happy to link to your post.
Leave a comment about funding a Roth IRA.