savings account

Muwahahaevillaughhahaha. For those of you that come here for my lame sense of humor, and not so much for the finances, prepare to be a little disappointed. I’m actually going to blog about money (well kind of) so bear with me. Do you know what a Roth IRA is? If you love finances, then you definitely do. If you don’t know anything about them, give me 5 seconds of your time to explain…

Roth IRA (noun)- an investment vehicle that will make young people filthy rich with minimal sacrifice.

Okay so now that you know what a Roth IRA is, I’m gonna share a little bit about my accounts. Last time I wrote about my Roth, I made the decision I was NOT going to max it out this year. I had $1,500 left (max contribution of $5,000) that I could have thrown at it, but decided not to for two reasons.

The first being that the markets were freakin’ me out in August. I was going to put that $1,500 in to an international mutual fund, but after a 33% gain from January to August, I was a little freaked out there was an artificial high. Stupid move on my part, as of Dec 18th, that mutual fund had gone up another 8% since. That’s a pretty awesome return considering my savings account is only paying 1.3%. I let fear determine my investing strategies, and for that I paid the price.

The second, and really the only reason, I decided to hold off on maxing out my Roth this year: I was gonna use that money to pay down my student loan instead. My loan’s interest rate at 7%, is pretty high (as far as student loans go), so I figured throwing the money there would be a good guaranteed rate of return. Like a good Ninja, I have paid down Sallie Mae $4,000 over the last four months. Although I missed the 8% growth in my mutual fund, I secured a 7% return by paying down my debt…not a bad trade off if you ask me.

Okay, so the plan was to only contribute $3,500 to my Roth this year, but guess what, SCREW THAT ‘ISH! My savings account is now $1,500 poorer. That’s right, I decided to max my Roth. I had a pretty stellar 2009, saving more money than I predicted I’d be able to, so I figured it was time to make that money work a little harder. I was 21 when I graduated college and made a commitment that I would max out my Roth every year. I can now proudly say, I have successfully done so for the last three.

I have contributed a total of $14,000 to my Roth over the years, and my current account balance is $13,500. That means I am only down $500. I started investing right before the stock market tanked, and watched my accounts plummet, but because I decided to stick to my goals and invest in a pretty scary market, I have been able to recoup virtually all that loss. I plan to be an old Ninja with a lot of money one day, and my Roth IRA is one of the best ways to make that happen.

If you are under 40 years old and haven’t thought about contributing to a Roth IRA, you NEED to explore the option. Even with two pretty crappy stock market crashes, my specific international mutual fund is up 5% over the last 10 years. There is no guarantee the market will continue to rise, but I couldn’t be called a Ninja if I wasn’t willing to take risks. It’s like Forest Gump once said “Life is like a box of mutual funds, ya never know what you’re gonna get'”. Wait, that’s not right.

Do you readers contribute to your Roth IRA’s every year? Do you let the “fear” of the market play in to your decision making? Is your account balance above or below the total contributions you’ve put in to it? If you’re from Canada, do you have a Roth IRA equivalent?