If you don’t know, I love Roth IRA’s. I’m banking on my Rothizzle to make me filthy stinkin’ rich. You may think I’m a little optimistic, but I call it realistic. My favorite “You’re gonna be loaded calculator” can be found here , but I’ll just walk ya through what I punched in.
I’m 23 years young and currently have a Roth IRA balance of $8K. If I continue to max my Roth contributions through retirement (age 65) I will have about $1,800,000 waiting to be used and abused. I assumed an average rate of return of 8%. Why 8%? The stock market has averaged about 11%, but I wanted to adjust for inflation (3%) to bring me to an overall rate of return of 8%.
Now you skeptics out there are probably thinking “Inflation may be way higher than 3%, or the stock market wont come close to averaging 11%”. Let’s pretend you know what you are talking about. If I only earn a 5% rate of return, either because the stock market sucks or inflation goes through the roof, I still walk away with $794,717….not too shabby if you ask me. Especially when you take in to account I will also have a wifey that will be maxing her Roth out and we will both be contributing to our righteous 401k plans. I’m pretty sure I’ll be a bagillionaire by the time I retire and when that day comes, I can’t wait to give it all away to noble causes!
Tomorrow I’ll get in to the specifics of why Roth IRAs are the coolest thing since teriyaki chicken, but for now head over to that calculator and find out how rich you could be!