So yesterday was Roth IRA awareness day, where hundreds of personal finance bloggers banded together to spread the good news about Roths. I’m sure you noticed I wrote no such post, in fact, I wrote no post at all yesterday. While I’d like to pretend this is just because I am so rebellious I go against societal norms, the reality is I simply forgot to do it. 

I told my buddy Jeff Rose (Met the dude in real life multiple times. He’s a good guy), I would join the cause and spread awareness about Roth IRA’s faster than chlamydia spreads through a college frat party. It’s a day late, but I want to honor that promise I made. Enjoy some Roth IRAwesomeness…

If you don’t already know, the Roth IRA is a way to get insanely rich with minimal effort. This holds especially true for younger people. The younger you are, the more time your money has to grow. Compound interest for the win!!!! The Roth lets you make contributions with your after tax money (the money you actually get in your paychecks). Your contributions grow tax-free forever and you get to pull out all the profits without having to pay anyone a dime. It’s seriously amazing!

Don’t be confused, Roth IRA’s are not a type of investment, just a way to invest. You can use your Roth to invest in stocks, bonds, REITs , etc. If you’re investing in a 401k, you can even make your Roth investments mirror your company sponsored retirement plan (this is kinda what I do).

There are really only two downsides I see to the Roth IRA. 

  1. It leaves you poorer. If you max your Roth out each year, you are giving up $5,000. Five thousand you could have spent on things like vacations, new gadgets, etc. Good things never come easy. If you want to have millions waiting for you come retirement you have to win the lottery or start investing in your future.
  2. It takes time. With the economy being about as stable as Charlie Sheen’s mental health, my return on investment has been less than stellar. Over the last five years, I’ve put $25,000 in to my Roth and it is currently worth $28,759. That’s a gain of $3,759. It’s not bad, but it’s definitely not where I’d like things to be. If you are super emotional, you may not be able to wait out a crappy market.

Other that those two things, the Roth IRA is pretty much the best thing since sliced bread and if it’s already not part of your retirement portfolio, you should consider adding it. When hundreds of personal finance bloggers band together to tell you about something (when there is no personal gain for doing so) you should probably listen. Just sayin’

You got a Roth? Why or why not? You max it out each year?

Favorite Nail from yesterday: Come at me bro.


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