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Millennials and Roth IRAs: A Perfect Long-Term Marriage

Millennials and Roth IRAs by Isakov Planning Group

What’s the best way to convince young people to invest for their retirement now? With stark, plain numbers that speak for themselves! If you invest $6,000 (today’s annual maximum) in a Roth IRA each year for 30 years, the account would grow to a whopping $1.4 million. This figure is variable, of course, but is based on the historical 30-year performance of the S&P 500 (10%-12% annual growth). The best part is, your contributions would only total $180,000, and the rest—$1.2 million—would be tax-free growth. Did I also mention that withdrawals from the account (contributions or accumulated savings) are not taxable? Now think of how the savings will build for a married couple over a long period of time. This is a great way to persuade millennials that the time to consider a Roth IRA is today.

Young people born in the 1980s and 1990s have been facing some very difficult challenges, including high student debt, rising home (or rent) prices (and home purchases that require higher down payments), and now, like everyone else, they stare down the dark tunnel of inflation. The Roth IRA makes a lot of sense for these millennials, simply because it works with a relatively low annual contribution.

The only hesitation may be that the Roth IRA requires that contributions be taxed immediately, unlike a traditional IRA. This may not be an issue though, because these young people may be in lower tax brackets today compared with after they retire.

So the sooner a millennial starts saving with a Roth IRA, the more likely that person will have a secure, financially worry-free retirement. That’s the message a financial advisor like Isakov Planning Group gives to younger people. And we can easily set up their retirement account in very little time.

Unlike traditional IRAs, which require the account holder to take a minimum distribution each year after reaching a specified age, Roth IRAs do not require any minimum withdrawals. This allows the full amount of your account to continue to accrue value if you don’t need it at that time.

The Roth IRA is not the best savings vehicle for everyone though. For example, older people who have gotten a late start on building their retirement savings will likely want to contribute more than the $6,000 per person cap allows. A younger person who is in a higher tax bracket and may earn too much money to qualify for the maximum contribution (or expects to be in a lower tax bracket after retirement) may also want to consider other options. We are happy to discuss the full spectrum of retirement savings vehicles and what may be best for any individual’s financial situation.

Contact us today at Isakov Planning Group for a free, introductory call with millennials seeking advice about the right retirement savings vehicle for them.

Office Locations

671 2nd Street Pike
Southampton, PA 18966

1346 How Ln
North Brunswick, NJ 08901

500 7th Avenue, 8th floor
New York, NY 10018

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Isakov Planning Group brings industry leading resources and expertise to help our clients pursue and achieve their financial goals.