One of my first moves toward FI was to begin my retirement planning. I was quite clueless on the process, I just knew that I couldn’t (and still can’t) rely on Social Security or other potential programs to sustain my living once I reach the ripe old age determined as “Retirement”. You see, I don’t specifically have a plan about when I want to retire, I just know that I want to be able to retire. As a millennial, I know that times are changing and programs that my baby boomer grandparents rely on most likely will not still be in existance in 50 or 60 years. This is okay with me. I know that FDR, who began Social Security, did not want it to be the full retirement, but rather a supplement. That is what many people of my generation do not understand. As we have been labeled the “Entitled” generation, I see this everyday. I know that I even sometimes act as such.
But anyway, I relied on the advice my father gave me in terms of retirement. He lost something like $120k in 12 minutes back in ’08. He’s never going to be able to make that up. Good thing my dad isn’t the type to sit around, though you can see where I get my goal to provide for his later years. He directed me to JP Morgan Chase for my Roth IRA. Now, being an impressionable 18 year old, I went along and made my initial retirement fund with them. However, after watching several documentaries on the collapse of ’08, I have since learned that they aren’t always the most stable or honest of banks. So, I will let my five years pass on this IRA, and roll it over to another account elsewhere. Hopefully it will have grown more than my initial investment. I am currently looking at companies such as Ally Bank and Vanguard. Ally has fantastic customer service and I know the products they offer, but my fellow FI thinker in high school opened her Roth with Vanguard. We’ll see how she’s doing with it next time we talk.
Currently, my investor is only buying on a semiannual basis. This is honestly all I can really afford at the moment. I placed an initial investment of $500. It has since grown to about $540 since July, which isn’t horrible, I don’t believe. I’ve been only transferring in $25 per month, but I discovered this did not match the 10% rule, where you dedicate 10% of your gross income to your IRA, so I upped the anty to $50 per month, which does fit the rule. As you can see, I do not make much per year, but I also do not have very many expenses at the moment, more on that later.
Roth IRAs are nice because you contribute to them using your net income, therefore they won’t tax any withdrawals from the account because you’ve already paid your dues on it. I also like that, unlike a Traditional IRA, you can access the Roth for any reason after five years. Currently, for a single individual, the maximum contributions per year to a Roth are $5500 or about $450 per month. Unfortunately, I cannot contribute this maximum at the moment.
What are your experiences with IRAs and are you able max out each year?