Roth IRA’s

Happy Friday!! As I mentioned yesterday, today is my very last day of Girls on the Run. I’ll be hanging around the house today doing homework until it’s time for me to leave. It’s going to be bittersweet; I’ll miss seeing the girls learn and improve, and I’ll miss my fellow coaches even more. However, I’ll also be glad to be able to remove the long drive from my to-do list every Friday!

Yesterday I had to give a PowerPoint presentation in my public speaking class. We could choose any topic, so long as it was somewhat “scholarly.” I chose to do my presentation on Roth IRA’s! Since most of my classmates are around my age (20 years or so), I thought that it might be something they need to know about. I myself just started my own Roth, and I’m really glad I did. Today, I figured I would recap my presentation for you guys!

—What is an IRA?

  • —Individual Retirement Account– a way to save for retirement!
  • —Contribute pre-tax dollars– you still pay taxes on the income that you make, but after you put the money into an IRA, you get those taxes back.
  • —Must pay taxes on disbursements– because you don’t pay taxes before you put it in, you have to pay taxes when you take the money OUT.
  • —Must take disbursements after 70.5 years of age– this just means that you cannot let your money continue to grow after 70.5 years of age.

—What is a Roth IRA?

  • —IRA made up of after-tax dollars– you pay taxes on the money that you put into the Roth.
  • —Do not pay taxes when you take out your Roth– because you pay the taxes before you put the money in, you DON’T have to pay taxes when you take it out!!
  • —Under 50 years of age – $5,000 per year– this is just the amount that you are allowed to contribute if you are under 50 years old.
  • —50+ years of age – $6,000 per year– if you are 50+ years of age, you are allowed to contribute a little bit more to your account.
  • —Can continue to grow after 70.5 years of age– you can let your Roth continue to grow after you turn 70. This might sound odd, but if you have enough money to retire without it, you could continue to let the money in your Roth grow. You could give it to your children or your grandchildren, or keep it for when you really need it.

I want to show you a little comparison:

Take this situation: a 20 year old wants to start a Roth IRA. If they start when they are 20, put in $1,000 per year (for 40 years) at a 20% tax rate with a 5% return (it would actually likely be higher than this), they will save $126, 839.87. That’s a lot of money!

Now, say a 40 year old realizes that they should have started saving for retirement when they were younger. So, at the age of 40, they begin to put in $2,000 per year (for 20 years) at the same tax rate and same return percentage. They would only save $69,438.51. That’s still a good amount of savings, but not nearly as much as the person who started when they were 20.

Remember, BOTH individuals put in $40,000, one just started 20 years earlier than the other. This has the potential to make us all a good amount of money!

*DISCLAIMER*- I am NOT a professional by any means, this is just what I have learned through my research for this presentation, along with what I have learned from one financial course and what my parents have taught me. You should DEFINITELY consult with a professional before making a financial decision such as this one. I have no financial background whatsoever 🙂

My sources for the above information are below:

Detzel, L. Y. & Bonnet, E.N. (2009). Roth IRA conversions: Benefits and planning opportunities.   Florida Bar Journal, 83(6), 83-86.

tcalc.timevalue.com

I actually enjoyed the information given in most of my speeches this year, so I think I will start to recap a few of them for you guys! My other two favorites were my informative speech about The Color Run, and my persuasive speech about cancer prevention.

I hope you all have a great weekend! I have a wedding in Prescott to go to tomorrow. The high is supposed to be 45 degrees, and it’s actually supposed to snow a little bit! It will be nice to escape the heat, even for a day. Sunday morning is our Girls on the Run 5k. I haven’t been running much at all this month, but hopefully I’ll be able to pull out my 3.1 miles. It will be a busy, but fun weekend!

Do you have a Roth IRA?

Have you ever had to give speeches?

What are your plans for the weekend?

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