Roth IRA: As Old As a Millennial

Previously I wrote about the Roth IRA turning 20 this year (in 2018). The Roth IRA first became available in January 1998 when it was signed into legislation (thanks to Senator William Roth of Delaware). 20 years later it is still the single greatest retirement account for all individuals…especially us Millennial’s who are in low tax brackets. Stock market returns are really, really hard to predict. You know what may be even harder to predict? Your tax bracket at retirement!

In my past blog post on the Roth IRA turning 20, I also stated that if you had maxed out your Roth IRA since day one back in January 1998, you could expect to have a total balance of over $194,000 today in 2018! Maxing out your Roth IRA since 1998 would have costed you $81,500, but you would more than double your investment by having a balance of nearly $200,000 today.

We Millennial’s obviously couldn’t take advantage of the Roth IRA since 1998, considering our age and when we actually began working and truly were eligible to contribute to a Roth IRA of our own. I want to use this post to looking ahead and encouraging all Millennial’s to not only opening a Roth IRA, but maxing out a Roth IRA.

Did you know that if you open a Roth IRA today, in 2018, and max it out every year ($5,500/annually), you could end up with close to one million dollars? Based off a 10% annualized return over 30 years, an initial investment of $1,000 with an annualized contribution of $5,500 could net you a total of $922,000! That means you paid $458/month for 30 years ($165,000 net investment) and ended up with nearly $1,000,000.

What if you made the same investment but only for 35 years? Say from age 25-60. You would end up with over $1,500,000 by the time you were 60 and looking to retire (early).

If your timeline were even longer and you could invest that amount for 40 years (age 25-65), you could end up with nearly $2,500,000 by the time you were 65.

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