According to Sunmark, 64% of Americans will enter retirement broke. On top of that, 47% of Gen Z workers said they have no savings for retirement. Retirement is one of the most important stages of life for savings and if you don’t have any savings to rely on, you may not be able to retire with your current lifestyle. In turn, you may have rely on governmental help and continue working jobs for extra money to survive. But what is the solution to saving for retirement?
A Roth IRA Is a tax advantaged savings account for retirement. It was created in 1997 by Senator William Roth to help incentivize retirement savings and investing. The Roth Ira works by opening an account with a brokerage firm and buying investments with money placed into the account. Unlike the traditional IRA, money placed into the account (contributions) is taxable but any profits/ growth from investments within the account aren’t taxed when removed after the age of 59 ½. You can take out any money from the account at any time but if you are younger than 59 ½, you will be faced with a fine and will have to pay tax on the money.
This is a very useful tool for teens who are entering the job market because it can help you retire safely in your golden years. Many economists say that the key to investing is the time your money spends in the market, not timing the market. When using a S&P 500 index fund that averages a 8% return historically, you can retire with 6 to 7 figures saved.
If you start at 18 (but you can start younger with a parent), and use your max contribution every year until you retire (max contribution in 2020 for single filer making under income limit is 6,000 and 7,000 after turning 50 a year), you can definitely have over $100,000 saved. To see how this would work specifically with the amount of money you want to invest, book a session with us today.
Overall, a Roth IRA is one of the bet ways for Gen Z to start saving for retirement and can be used to become a millionaire by the golden years of life and to have financial freedom in retirement. Please stay tuned for future article to help you become a teen trillionaire!
Written by Ian C