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comment by rinx
rinx  ·  3392 days ago  ·  link  ·    ·  parent  ·  post: Don’t Be So Sure the Economy Will Return to Normal

Heh, sorry can't help myself from chiming in when I see posts like that.

From this blog post:

    John* starts putting $100 a month in his Roth at age 25 until he’s 65. When he retires he’ll have $1,100,000. (assuming compound interest around 8%)

It's incredibly important to save while your young, even a small amount helps. If your company sucks, doesn't match 401ks or other reasons, Roth IRAs are a typical vehicle for this. The limit is $5,500 as long as you make under 6 figures.

Why Roth's are bananas great: The money in your Roth grows tax free. On top of that, you can take out the principle (the money you put in) if you hit a life emergency and need the cash. That's why there is an income limit, its basically a really awesome savings vehicle designed for middle class Americans.





b_b  ·  3392 days ago  ·  link  ·  

WTF? By my calculation, John will have about $350,000, depending on the compounding formula. Unless they're making that $100 contribution inflation adjusted or something. Or he's starting with $30,000 in his pocket.

rinx  ·  3392 days ago  ·  link  ·  

Yep! Inflation adjusted. However $100 a month for your entire retirement is pretty small. Here's another look with a little more put into investing:

http://www.getrichslowly.org/blog/2008/04/02/the-extraordinary-power-of-compound-interest/

And again, this is doing it all yourself, in a Roth, no company match. Gets a lot easier if your company helps.

b_b  ·  3392 days ago  ·  link  ·  

That makes a lot more sense. $100 real dollars per year. I agree that's way too little to be something to rely on, but it's a good start if it's all you can afford at the time.