Shhhhhhhh…..can you hear that….that’s right baby it’s the Roth IRA Movement. So here is how the movement got started; Jeff Rose went to speak at his alma mater and polled the soon-to-be graduating seniors, and not a single one of them raised their hand when he asked if they heard of the Roth IRA. Here we are today a group of about 150 bloggers preaching to the nation and hoping they listen. For my friends following along on twitter it’s: #RothIRAMovement
In case you were one of the ones polled, here is what a Roth IRA is: The Roth IRA is a retirement investment vehicle where the premiums that are invested are after tax. This means that when you are ready to take the distributions that they are not taxed. The money that you invest can be invested in stocks, bonds, mutual funds, CD’s and even real estate.
There are annual contribution limits for the Roth IRA: For 2012 they are $5,000 and if you are over 50 you can contribute up to $6,000 assuming you fall below the income limits. You may also qualify for catch up contributions as well, be sure to talk to your financial advisor for more details. The income guidelines for 2012 are referenced below:
•Single or head of household: you must earn less than $111,000 to fully contribute to a Roth IRA
•Married filing jointly or a qualified widow: you must earn less than $173,000 to fully contribute to a Roth IRA
•Married filing separately: you must earn less than $10,000 to fully contribute to a Roth IRA.
The number one reason why I love the Roth IRA is the flexibility. As an adult in my late 20’s, I am looking for flexibility in my investment portfolio and the Roth IRA delivers just what I need. The Roth IRA is flexible if you need to take a distribution to purchase a house…no problem. The Roth IRA will allow you to save for the kiddie’s college fund…no problem! You can withdraw your contributions at any time with little restriction, and you don’t have to pay it back like a 401k and there is no penalty! After you have had your account open for 5 years you can access the earnings without paying tax if your situation fits one of the “qualified” reasons. The Roth IRA allows me to save but also have the ability to tap the money should I ever need it.
I hope to be living the lavish life when I retire and the great thing about this little retirement product, I won’t have to worry about paying taxes on the distributions.
It is very important that even your little brother who just started delivering the paper start a Roth IRA. The great thing about the Roth IRA is that there are no age requirements to start an account, so he can!
While you are at it be sure to check out some of the other great sites that are focusing on the Roth IRA Movement today! Follow us on twitter @thsthtandthemba @jjeffrose
It is surprising that young people do not know more about this investment option. Even though I’m Canadian I already know a fair bit about it. I didn’t realize that there were no age restrictions though. Not being taxes when you withdraw is an awesome benefit too.
@ Modest Money – It is sad what people do not know. Social Security who knows where that is going, we need to wake up and start saving for ourselves.
One of the biggest problems with our school system is there is no classes about investing. With social security dying off, it is more important then ever for young people to start investing.
@ Short Road to Retirement – I can tell you about what a pronoun and verb are which has proven me no use in my adult life, but a class about the finances you will deal with in live would have been crucial.
Great post, Christopher. I’m a big Roth guy myself. I’m with Modest Money, too. We need to set up a table at colleges peddling Roth IRAs instead of credit cards….
@ Nick – definitely, we will have to get some tshirts or something to give away because college kids love stuff for free! The Roth IRA Roadshow we could call it!
As Jeremy and Nick said, I think it’s terrible that our high school and college students know more about credit cards and student loans then investing in their future. I guess because college is so expensive these days, most students think they can’t afford to start a Roth. I can’t remember where I read it (someone’s pf blog), but someone recently posted about a school that was offering PF courses over spring break. I think something like that should be offered at all universities. I certainly would have attended.
@ Kari – that would be a tough sell to college kids. Cancun or PF courses? We need to just teach kids that you cant spend what you make and that you need to have a savings plan. Like the Roth you can have access to the money if you truly had an emergency!
@Nick – that’s a pretty good idea! I might implement that into my business strategy…hmmm…
The downside is that they’re broke (I guess which is why they love credit cards).
Go Roth IRA Movement!!
@ WorkSaveLive – peddling Roths at colleges. That would look good on the ole resume. They are broke or they took out that extra large student loan so that they had money to spend for the semester and the last thing they are going to want to do is invest it in something other than alcohol or fun!
I’m shocked that in this day and age, and with so much information online, that these soon-to-be graduating seniors had never heard of a Roth IRA. In fact, it’s very frightening to think of how many more people, whether they be high school seniors or working-class adults don’t know about the Roth IRA. This is a great movement, and I’m delighted that you and other PF bloggers have started it. It’s extremely important that everyone, regardless of age, understand the benefits of owning a Roth IRA.
@ Anthony – the youth of today are ignorant and if it isn’t somewhat social and presented directly to them they don’t listen, just my opinion because I work near a college dorm and see the kids walking back and forth all the time.
Great post! I’m learning a lot about the reasons to fund a Roth today on all the blogs in the movement, and I can’t WAIT to open mine!
@ Nell – That is tomorrow’s mission get out there and open one up!
I think Roth IRA is great. Just pay your taxes now and be free of any hustle after retirement when liabilities are more
@ Karunesh – it will be nice to have something that you can finally receive and not have to worry about taxes on…and this is it when we retire…who knows what the tax structure will look like in 30 years.
Great post about the ROTH IRA i missed the challenge given by Jeff Rose. I like the title.
@ Lorilla – Thank you!!! I hope you found it somewhat useful, but you are already contributing right????….right!!!
By self-directing your Roth IRA, you can enjoy even more flexibility because it allows you to access private investment choices such as private lending, tax lien investing, investing in property rentals, etc.