Instructions on How to Grow $1,000,000!!!

A Roth IRA is a type of retirement investment account. The difference between a Roth versus a regular IRA is “when” you pay the taxes on the money.

Roth IRA: Pay income taxes at the time you earn the money, and the invested funds and compounded interest grows tax-free. When you pull the money out later, you will not have a tax liability on those funds.

Regular IRA: You take a tax deduction for the funds during the current tax year. When you liquidate the funds at the time of retirement, you owe taxes on the amount you withdraw per year based on your current income tax rate.

I like a sure thing, which is why I pay my taxes up front (so that when I withdraw the funds later I don’t have to pay taxes).

gold piggy bank

This means that when I look at my Roth IRA account, all of the funds are mine (no calculations or guessing involved)!

You can open an account with any number of brokerage companies. I use Vanguard because you can trade an unlimited number of their index funds for free.

In a prior blog post, I showed you how you can save $650 per month by reducing the amount you eat at restaurants and cooking your own meals.

The maximum amount that you can contribute to a Roth IRA account per year is $5,500, which is $458 per month (you can fund your future retirement by not eating out today)!

A 7% Average Return on Investment Over any 40-Year Period:

Experts say that over any 40 year period, the stock market has an average return of 7%.

By using a retirement fund calculator, we can see that the overall return for a Roth IRA account is $1,174,853!!!

The assumptions: you have annual contributions of $5,500. The money grows an average of 7% per year, and the funds are invested over a 40 year period.

Bam! Just like that and you are a millionaire!!!

Dollar Cost Average:  Buying a fixed dollar amount of a particular investment on a regular schedule.

I usually purchase ETF’s on the 1st of the month, while I am paying all of my other bills. This makes investing a habit, and part of my monthly routine.

Remember, that routines put actions on autopilot, so we don’t have to think too hard about them. 

I love to break things down so that we can visually see what kind of monthly goals you need to have to achieve the maximum contribution.

$5,500 per year divided by 12 months is = $458 per month.

Can’t find $458 per month? Read this article to see how you can, in fact, save for retirement!

Create Habits That You Can Put on Autopilot:

Investing should become an automatic habit, like brushing your teeth.

Time management and efficiency apple earbudsWhile we are on the topic of brushing your teeth, add listening to an audiobook while you get ready in the morning to your list!

It takes me half an hour to get ready in the morning, and half an hour at night. Additionally, I spend at least 30 minutes driving to and from work every day.

With the cordless Apple Earbuds, I am able to listen to 2 hours of a book every day!

Yes, other cordless headphones do work, but this all-in-one earbud integrates Siri into the user experience.

What does that mean? I can make phone calls by double tapping, ask Siri to turn up the volume, when I take one earbud out the audiobook automatically stops playing, and so many more awesome features!!!

As you know, I am a life learner. These earbuds allow me to crush a 300-600 page book every 1.5 weeks! I multi-task listening to books while cooking, cleaning, exercising, and driving!

Retirement is Possible:

 

Start young, and be consistent. The younger you are, the better off you will be.clock.jpg

The more time the funds are invested, the more tax-free compounded interest you will earn!

With any retirement account, there are restrictions and penalties for withdrawing before the age of 59.5.

One of the general goals of this blog series is to explain how to win the “Game of Money”.

We all have a financial report card, dreams of retiring (or at least want to not HAVE to work), and a desire to have enough money financially.

Investing in your future should be part of your once per month habits.

You pay your bills on the 1st of the month, add “Roth IRA contributions” to that list (so that you won’t forget)!

You get one body and one mind. Take action by feeding your mind today. Get your hands on a pair of the Apple Earbuds and start listening to books today!

What habits and routines do you have in place to take care of yourself? Do you have a topic that you would like to know more about? Comment below!

 

Photo credit

Piggy bank

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Lynzee Lai

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