Think there's a work-around for those whose income exceeds the limits ... make the Traditional IRA contribution as close as possible to the end of the calendar year, then turn around and convert it to a Roth as soon as possible after the beginning of the new year. Should generally involve very little tax to pay and should be worth it for the long-term benefit over the years to follow. Picked this up from a Clark Howard broadcast, I think, some time ago and don't ever recall seeing anywhere that's it's not allowed. Good luck!
I agree with you wholeheartedly. My folks seem concerned with leaving an inheritance for the three of us, each of whom they've assisted over the years whenever we had need (with college costs, first cars, getting started in our first homes, etc.). They are naturally loving and generous individuals. However, I've told them many times that the greatest gifts they've ever given us is that they took care of themselves and each other, and they planned for their own futures. They are both healthy, and they've down-sized over the years (a sorting and purging task that will also save the three of us time and effort later), into a lovely home in a well-kept community near all of us. We don't need an inheritance. We've already been richly blessed with everything we could ever have asked for.
I'm just going to concur with most important financial concept being Compound Interest. I saw a chart once that showed how investing the max in your IRA over the first six years (then stopping) would result in just about the same total after 30 years (I think) as starting to invest the max beginning in the seventh year and continuing for the next 23. This was years ago when the max contribution was only $2K, but it really got my attention. Imagine putting in only $12K over six years early on vs. putting in $48K over 24 years later, then ending up with almost the same total at the end (within a few $K). I was floored -- and absolutely convinced. MAGIC! BTW, I held onto that article with the chart and shared it with many youngsters for several years before I lost it, and I think it made impressions on many.
My top financial worry is for the future of someone I love very much -- my young adult son who has autism, who will probably be unable to live independently and has no siblings, close friends or others who will likely step up to take him in or care for him when I'm incapacitated or gone one day. It's a huge life favor to ask someone to be your back-up and agree to forever be responsible for loving and caring for your child if something should happen to you, especially when your child isn't likely to ever leave home or create a life of his own separate from theirs. I suppose this is first a life worry (about the right someone), but it's also a financial worry since my son who's healthy, in his 20's, could easily live 80 years plus with life spans increasing as they are. Either way, this is what I think about as he and I continue to live now and prepare for the future.
Start a Roth IRA and max it out every year. Let compound interest do the rest for you. I followed my dad's advice and started an IRA with Vanguard as soon as I began working, started a Roth when it became available, converted my regular IRA over to a Roth when the opportunity was offered to pay the taxes over several years and I've never looked back. I now have 7 figures going strong, spread over just five accounts, and not too many worries after nearly 40 years of letting it ride.
That's the bottom line in terms of financial advice. The rest of the story is this: use your head and be sensible (if you're going to college, get a degree worth having; mine was in engineering, and it's served me well); be generous and support the causes you believe in along the way (and the people you meet who need help); never live extravagantly, and pay your bills on time because good credit is important (translation: I don't drive a Porsche or live in a mansion, but I have a nice car and a comfortable home); and last but not least, tithe (because it's all His anyway). ;)
Comments
Think there's a work-around for those whose income exceeds the limits ... make the Traditional IRA contribution as close as possible to the end of the calendar year, then turn around and convert it to a Roth as soon as possible after the beginning of the new year. Should generally involve very little tax to pay and should be worth it for the long-term benefit over the years to follow. Picked this up from a Clark Howard broadcast, I think, some time ago and don't ever recall seeing anywhere that's it's not allowed. Good luck!
Post: Do you favor Roth or traditional retirement accounts, and why?
Link to comment from March 11, 2023
I agree with you wholeheartedly. My folks seem concerned with leaving an inheritance for the three of us, each of whom they've assisted over the years whenever we had need (with college costs, first cars, getting started in our first homes, etc.). They are naturally loving and generous individuals. However, I've told them many times that the greatest gifts they've ever given us is that they took care of themselves and each other, and they planned for their own futures. They are both healthy, and they've down-sized over the years (a sorting and purging task that will also save the three of us time and effort later), into a lovely home in a well-kept community near all of us. We don't need an inheritance. We've already been richly blessed with everything we could ever have asked for.
Post: How much financial help should parents give their children?
Link to comment from March 11, 2023
I'm just going to concur with most important financial concept being Compound Interest. I saw a chart once that showed how investing the max in your IRA over the first six years (then stopping) would result in just about the same total after 30 years (I think) as starting to invest the max beginning in the seventh year and continuing for the next 23. This was years ago when the max contribution was only $2K, but it really got my attention. Imagine putting in only $12K over six years early on vs. putting in $48K over 24 years later, then ending up with almost the same total at the end (within a few $K). I was floored -- and absolutely convinced. MAGIC! BTW, I held onto that article with the chart and shared it with many youngsters for several years before I lost it, and I think it made impressions on many.
Post: What’s the most important financial concept?
Link to comment from March 11, 2023
My top financial worry is for the future of someone I love very much -- my young adult son who has autism, who will probably be unable to live independently and has no siblings, close friends or others who will likely step up to take him in or care for him when I'm incapacitated or gone one day. It's a huge life favor to ask someone to be your back-up and agree to forever be responsible for loving and caring for your child if something should happen to you, especially when your child isn't likely to ever leave home or create a life of his own separate from theirs. I suppose this is first a life worry (about the right someone), but it's also a financial worry since my son who's healthy, in his 20's, could easily live 80 years plus with life spans increasing as they are. Either way, this is what I think about as he and I continue to live now and prepare for the future.
Post: What are your top financial worries?
Link to comment from March 11, 2023
Start a Roth IRA and max it out every year. Let compound interest do the rest for you. I followed my dad's advice and started an IRA with Vanguard as soon as I began working, started a Roth when it became available, converted my regular IRA over to a Roth when the opportunity was offered to pay the taxes over several years and I've never looked back. I now have 7 figures going strong, spread over just five accounts, and not too many worries after nearly 40 years of letting it ride. That's the bottom line in terms of financial advice. The rest of the story is this: use your head and be sensible (if you're going to college, get a degree worth having; mine was in engineering, and it's served me well); be generous and support the causes you believe in along the way (and the people you meet who need help); never live extravagantly, and pay your bills on time because good credit is important (translation: I don't drive a Porsche or live in a mansion, but I have a nice car and a comfortable home); and last but not least, tithe (because it's all His anyway). ;)
Post: What should be the top financial priorities for those in their 20s?
Link to comment from March 11, 2023