Featured Photo: Amazing money growth of a Roth IRA
Description: On todays episode we give an in depth look on the best ways to save and grow your money for both the short term and long term. MLB superstar Mike Scioscia gives us his ideas on the best way for young people, save, invested, and spend.
Behind The Episode
Mike Scioscia
On this episode we were very lucky to have the one and only Mike Scioscia. Other than being one of the best hosts for Super Bowl and Oscar night parties, Mike’s baseball accomplishments are unmatched. Winning the 1988 World Series as the catcher for the Dodgers and 2002 World Series as the manager for the Angels. His longevity in the sport serves as a testament to his character, as he also is a major figure in youth baseball, through his charities and development programs. In addition to being a sports legend, Mike is as savvy as it comes in the world of investing and real estate. For more info about him visit the page below.
Roth IRA
Roth IRAs are an amazing way to become a millionaire when you retire, with very little investment.
The chart above (in the green) shows how much money you will retire with if you put away $6,000 a year, every year from when you’re 18 to when you are 65 years old. Over 47 years that $6,000 dollars equals a total investment of $282,000. Seems like a lot right? Well yes and no, dividing it up over time ends up not being as much money as we think. It ends up being about $500 a month, which with the average US income at aprox. $3,900 a month it is a very reachable goal although it may be difficult at first it can be done with careful spending. But that $500 a month will eventually turn into $2,160,000 by time you are retired. That’s nearly 8 times the amount of money you put in. All from just transferring money to an account. But for a lot of people that may be a hard monthly amount to reach which is understandable so the chart below shows what just $125 a month can do.
From just $125 a month you can have over half a million dollars by time you retire.
Now one of the best parts about a Roth IRA vs a standard IRA or other type of investment account is the taxes. All of the money in the Roth IRA is un-taxable. Now when contributing you can not use the contributions as a tax write-off but you won’t be charged taxes on any of the money that you withdrawal. In the charts above, the blue section shows the money you would have if you contributed the same amount of money every month to a standard savings account. We can see that not only is it significantly less by the time of retirement, any of the money that you take from that account can be taxed. Mean all that money you saved and earned interest on is going to be taxed again!
To test the calculator out on your own: https://www.thrivent.com/tools/calculators/roth-ira.html
The starting contribution has to be a minimum of $1,000 for most accounts.
Annual Contribution is $6,000 a year, unless you’re over 50 it is $7,000 a year.
Average Expected rate of return is 7%
Starting your own
There are many different companies that offer reliable and good Roth IRA and retirement plans. The one that I have the most experience with and recommend the most is the Vanguard Target Retirement 2060 Fund. After you initial investment of $1,000 you can put in as little as you want or up to $6,000 a year when setup in a Roth IRA account.
In the section below we list a few more options for opening a Roth IRA.
Short Term Investment and Savings
Now the Roth IRA is definitely a long term investment but it is vital to setting you up for the future. But the same principals can be applied to short-term growth and savings as well. Putting your money in a standard saving account is huge, it is the first major step to well, saving money. But you want that money to grow right? Nowadays there are many ways of setting that up. There are many easy to setup brokerage accounts with most banks that can create an automatic transfer to find a safe but high interest rate investment plan.
The graph above shows that with an initial investment of $5,000 (this can be as low as $0) and with $100 a month in contribution you can save nearly $14,000 in just 5 years.
On the easier and less on hands investment and savings plan route there is an amazing app called Acorns. Available on both iOS and Android Acorns follows your spending and rounds up every transaction to the nearest dollar and takes the amount it used to round up and automatically places it in safe and strong investment account with pre-determined professionally managed mutual funds. Now in easier terms, the app is essentially creating a change jar from your bank account transactions and safely investing it. But since this only adds up to so much every month (however more than you may expect), they also offer the option to do an automatic monthly investment of any amount you want from $1 to $5000 or more!
Now although Acorns is a great app sometimes it doesn’t offer enough flexibility that some people may want. Now for large investment portfolios and more managed savings, Vanguard, TD Ameritrade, and Ally Invest are all excellent and affordable options.
And All of these Companies offer IRA management. Even Acorns.
Expense Report Photo of the Week
Sam’s three new echo dots! Possibly a give away stay tuned for updates!
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