Think twenty is too young to be thinking about your future retirement? Think again. Putting money into your own IRA account is one of the smartest ways to save for your retirement without paying thousands of dollars in taxes later on.
5 Reasons Why Young Millennials and GenZers Should Take Advantage of Roth IRAs:
You’ll Get Decades of Tax-Free Growth
That’s right. By taking advantage of a Roth IRA and following the rules, you’ll be able to put away thousands of dollars while your earnings and contributions grow 100% tax-free.
Withdraws After Retirement are Tax-Free
Why lose a percentage of your precious earnings and contributions when you can withdraw for FREE? A Roth IRA has this among many other benefits.
And if that wasn’t enough of a reason to start a Roth IRA young, individuals in their 20s often make less than their elders in their 30s and 40s, which means they’ll be in a lower tax bracket. Use this opportunity to put away as much as you can!
You Can Start at ANY Age (But the Sooner the Better!)
As long as you have an earned income, you can start your Roth IRA just as soon as you’re ready! Keep in mind that there is a limit to how much you can make when you’re contributing to a Roth IRA. If you are a single tax filer and earn more than $133,000 in 2020, you will not be eligible to contribute to a Roth IRA. For married couples the income cutoff is $196,000.
You Can Use Your Roth IRA Fund for Future Home Purchases
If you follow the rules, you can use up to $10,000 for buying, building or rebuilding a home. This is a “first time homebuyers exception”. However, this doesn’t necessarily have to mean you’ve never owned a home, just that you haven’t in the last two years.
Saving Young Means Saving More - And With Far Less Hassle
Financial planners will usually advise you to save between 15-20% of your income, beginning in your twenties, but having a clear goal is a much better plan.
You can find out specifically how much you’ll have to save a year using this handy financial planning calculator. Just remember that the more you can save, the better. After all, this is your retirement we’re talking about!
To put things in perspective, if you were to put a minimum amount of $1,000 a year towards your Roth IRA starting at the age of 20, you will have already accrued around 225,508.12 by the time you’re ready to retire at 65.
Contrast this with waiting until you’re 30 to begin putting a minimum of $1,000 a year towards your retirement, which would come out to be around $118,120.87 by the time you were 65 at an annual rate of 6%.
Another useful way to look at this would be that if you want to have over a million dollars in savings by the time you retire at the age of 65, you should be actively putting away around $4,500 a year from the time you’re 20 until you retire. This comes out to be $1,014,786.56 in total. Awesome, right?
Meeting savings goals will get harder the older you get because in order to save a minimum amount of around a million dollars for retirement, you’ll have to put nearly half your income into savings in a single year if you wait until you’re 40.
When it comes to retirement, the more you can save, the better. And that means the sooner you start, the more you can save and the easier it will be to meet your savings goals.
What Are You Waiting For? Open a Roth IRA TODAY!
For contributions in 2019 and 2020, you’ll be able to contribute as much as $6,000 to a Roth IRA for both years. Remember, you have until July 15 to contribute to your 2019 IRA; For contributions in 2020, You can deposit from Jan. 1 this year to the tax year’s filing deadline in mid-April of 2021.
When you open a Roth IRA account with Firstrade, you’ll be able to secure your retirement in a completely no-fee IRA. That means no maintenance fees, no account set-up fees and no annual account fee!
In addition, you’ll be able to take advantage of trading free of commission on stocks, options, and mutual funds in your IRA.
So what are you waiting for? Let’s open your Firstrade no-fee Roth IRA account and start saving for your future and retirement NOW!