This week my old man called me to let me know that he had invested around $1300 for me in a Roth IRA. He said it was from back when I was 1st making income at McDonald’s when I was 15. Now I love my dad, but he is a horrible investor. He should only stick with mutual funds, and what his adviser (his brother in law) tells him to do. The two stocks that he hand picked and invested heavily in, both went bankrupt.
Also the man has too many accounts and loses track of what he owns. Enter one Charles Schwab Roth IRA. He called me to let me know that I was $1300 richer, which I was happy to hear. There are two main points about Roth IRA’s that I would like to make.
First they are awesome, you pay tax on the money before you invest it, and that makes your withdrawals tax free. My Roth IRA with the Vanguard Group, and the 401k with my job are my main avenues to making it to a net worth of $1 million by age 40. The even better news is that the balance counts towards contributions from years back when I was in high-school. So for the 2008 calendar year I can still make the full $5000 contribution rather then $3700.
Secondly you have to have a Roth IRA. “Not I will open one soon” or “I can’t afford it right now”, if you know what they are, and you don’t have one punch yourself in the head right now. I am not going to beat a dead horse, because everyone writes about this but this is the best way to save for retirement. You have no excuse for not having a Roth or a 401k investment vehicle.
Nothing in life is a “sure thing,” but opening and fully funding a Roth in your twenty’s has to be the fastest and safest way to reaching the $1 million mark.
Glad to hear you love your Dad. By the way, we are meeting lots of people who work for Vanguard–big employer here.