Welcome to one of the most exciting posts that I have ever written here on the blog. Heck, this is the most exciting post!!
Why? The first reason is that it’s about one of my most favorite topics – the Roth IRA.
The second reason is that I’ve created an event and was able to get over 140 personal finance bloggers, media sites, and news publications on board. I can’t tell you how exciting it is to have a passion and to have so many others share that same passion with you.
You’re probably wondering what the heck is this Roth IRA movement all about. Let me explain…..
For a video explanation that includes me breaking it down to LMFAO, watch the video below. 🙂
It all started a few weeks ago when I was asked to speak at my Alma Mater. I was speaking to a group of soon-to-be graduating seniors with about 50- 60 in attendance. In my talk I was planning to cover savings, budgeting, and investing tips that these seniors would be faced with once they hit the real world.
When I reached the investing portion of my talk, I took a poll of the students to see how many of them had heard of my most loved investment tool, the Roth IRA.
Can you guess the number? Let me give you a hint:
I was in complete shock when not one single person raised their hand.
At first I thought maybe they didn’t hear me. Maybe I had already lost their complete attention because my talk was horrible. Just to make sure, I repeated myself making sure that they heard the question.
“Have any of you ever heard of the Roth IRA?”
Unfortunately, my shock was confirmed. No one in the room knew what a Roth IRA was.
How could it be? How could it be that I was talking about one of the greatest saving tools for any young investor and not one of these 20 year-olds, not one of these young adults, had any clue what it was?
They were getting ready to start their career, start making real money for the first time in their life, yet they had no idea who were the best Roth IRA providers or even what the Roth IRA was. I was fearful that too much time would pass before these students started to invest and then it would be too late.
I drove home that evening wondering what I could do to make a difference. How could I actually get more people familiar with the Roth IRA and unveil all the great benefits? I remember saying out loud,
“I need to start a Roth IRA movement.”
After hearing myself, I chuckled and thought,
“What a crazy idea.”
A Crazy Idea Takes Shape
The next morning I arose to still have the same idea stuck in my head. With all the online contacts that I had, I thought it was at least worth a shot, so I started asking bloggers,
“Would you blog about the benefits of the Roth IRA all in the same day to start a Roth IRA movement?”
I was blown away at the response. After the first day I had around 28 bloggers on board. After the second day, I was close to 60. By the end of the weekend, I was pushing 100. Now we’re well over 140 and still counting.
Two words: F.R.E.A.K.I.N.G A.W.E.S.O.M.E.
This post is a culmination of not only my efforts, but everyone on board.
What the Roth IRA Movement is Really About
Yes, I love the Roth IRA; but this movement is more than that. I’ve met with so many adults that are 2-3 times my age that constantly regret not saving or investing earlier.
I hear it all the time.
The most common excuse I hear is “I just didn’t know better”.
Well this movement is to make sure that young adults do know better.
The Chart That Rocked My World
Many of you that have a finance background have probably seen some variation of the chart below. The first time I saw it in college, I was completely blown away. What seemed like the obvious answer, was a jolt of reality of why it’s so important to start saving when you are young. Let’s dissect it a bit……
The chart has two young adults: Super Saver Parker and Super Slacker Sloane. Both graduate with good paying jobs and have well enough income to start contributing to a Roth IRA.
Super Saver Parker starts putting $2,000 a year into his Roth IRA ($166.67 per month). He does this for a total of 10 years and stops for a grand total of $20,000 he put in. Why does he stop? Don’t ask. That’s just part of the illustration. 🙂
Super Slacker Sloane puts off saving into his Roth IRA because he wants to buy “stuff” (otherwise knows as “crap you don’t need”). He finally gets it and starts putting $2,000 a year starting at the age of 35. Wanting to catch Parker, he puts in $2,000 a year for 30 years contributing $60,000 in total – $40,000 more than Parker. *We’re assuming that they both average 8% return on their money.
After they showed this chart to me in my finance class, the question that was then asked was,
“Who will have more money at the age of 65?”
I remember my initial thought was “Duh, the guy who put in $40,000 of course!“.
Hmmm…..oh how wrong I was.
|Super Saver Parker||10 Years of Contributions||Super Slacker Sloane||30 Years of Contribution|
|Ending Account Value||$340,060||$266,427|
The reality is that the person who started 10 years earlier had actually made $73,633 more even though they put in $40,000 less.
And that my friends is why I want to encourage young adults to save early and to save often. The beauty of the Roth IRA is that entire $73,633 is tax-free baby. That’s right! That means:
And there’s nothing sweeter than tax-free money! 🙂
The Roth IRA Movement Really Moves
If you’re not in your 20’s, don’t let the above chart discourage you. It’s never too late to start investing for your future!
I was so moved by the below comment from Jessica who blogs at The Debt Princess regarding my announcement post on the Roth IRA Movement:
Bringing awareness is always good, but when you can actually inspire to take action; man…I can’t tell you how good that feels!!
I asked Jessica to answer a few questions about what the movement meant to her:
1. What has been the biggest barriers that have prevented your from investing to this point?
Up to this point my roadblock has been lack of knowledge. I was very worried about investing because I didn’t know anything about it beyond sending my money to a 401K and forgetting about it. I also have always had debt to pay off and felt that I should focus on that.
The problem is that I’ve had debt for so long that I’m getting close to 40 and still have nothing to show for it. Finally, my income level never felt high enough to be effective in an investment so I haven’t done it.
2. What was it about the Roth IRA Movement that inspired you to finally take action?
I’ve been thinking about doing “something” recently. I have increased my income as a freelance writer and feel that I can put some money aside on a regular basis now. I trust my fellow bloggers and thought that with this movement the collective could really help me take control of this portion of my finances.
3. What advice would you give to younger investors about the importance of starting early?
I would tell young investors to avoid debt at all costs. Once you start getting into debt, you stop investing and that causes damage that can last for decades. I’d also tell them that once they do invest money, not to touch it.
I’m 37 now and kicking myself for cashing in my 401K’s each time I changed employers. I was so young and uneducated that I never realized what type of damage I was doing to my future.
Roth IRA Resources and a $5k Cash Giveaway
Before we get on to the massive list of articles, I thought it would wise to share some of the more popular articles on my site that discuss the Roth IRA. In no particular order they are:
- Can You Rollover Your 401k to a Roth IRA?
- Best Online Brokerage Accounts
- 7 Things You MUST Know About the Roth IRA
- How to Tap Your IRA With No Penalty
- In-Plan Roth Conversions – Convert It While You Work
- Roth IRA Rules Let You Save More for Retirement Than a Traditional IRA
- Learn to Manage all Your Accounts – Personal Capital vs Mint Review
- Scottrade Review – Top online Brokerage for Roth IRA
- Start a Roth IRA For Your Child
- Best Places to Open a Roth IRA
And for a awesome introduction to what a Roth IRA is, you have to check out this video from Kevin who blogs at Thousandaire. I toyed with the idea my creating my own video like this, but his is too good and I would just be wasting my time.
$5,000 Cash Giveaway to Max Out Your Roth IRA
What not a better way to kick off the Roth IRA movement than to give one lucky person $5,000 cash to fully max out their IRA? 4 other bloggers and I teamed up with IRAMarket.com to do just that.
The Roth IRA Movement Bloggers
Below is an extensive list of all the bloggers and sites that made the commitment to blog about the Roth IRA. Without them, then post would be almost useless. I’m humbled to have had so many step up and do their part to educate young adults on the importance of investing and the power of the Roth IRA.
- House of Rose: I Opened My First IRA Account. Age 22. I even got my wife to contribute. Now that’s a movement baby!! 🙂
- Bargaineering: Tax Diversification with Roth IRAs
- Wall Street Steward: Roth IRA movement
- IRAmarket.com: On a Beach Earning 20 Percent
- Bible Money Matters: 10 Reasons Why I Love The Roth IRA (And Why You Should Too)
- Barbara Friedberg Personal Finance: YOU DON’T NEED AN IRA; THERE’S ALWAYS SOCIAL SECURITY
- PT Money: What is a Roth IRA and How Does it Work?
- Best Rates In: When You Should Consider a Roth IRA
- MoneyPlan SOS: Pay For the Tree or the Seed
- USAA Financial Advisor Blog – Scott Halliwell, CFP®: Roth IRAs: DIY Tax Control
- Free From Broke : Withdrawing Money From a Roth IRA: How Does It Work and When Can I Do It?
- Parenting Family Money: Opening a Roth IRA for a Child – Help Your Child Get Ahead in Retirement
- Military Retirement & Financial Independence: Starting Your Kid’s Roth IRA
- WorkSaveLive: Everything You Need to Know About a Roth IRA & Why to Start One
- USAA Financial Advisor Blog – JJ Montanaro, CFP®: Support Your Local Roth Movement
- ChuckRylant.com: How to Invest – The Roth IRA Movement
- Beating Broke:What is the Roth IRA
- CultOfMoney: Anyone contributing directly to a Roth IRA is stupid
- Evolving Personal Finance: Earned Income: The Bane of the Graduate Student’s Roth IRA
- My Dollar Plan: 11 Unusual Roth IRA Strategies
- About.com: Roth IRA for Kids
- Young Professional Finances: Roth IRA: My Meager Savings
- The University Of Money: Best Mutual Funds for IRA
- The Budget Works: Join the Roth IRA Movement
- Womack Financial Blogs: The Roth IRA
- This That and The MBA: Roth IRA March Madness Style!
- Nick from Step Away From the Mall: