Understanding the Magic Behind Compound Interest and Your Roth IRA
Saving money while you’re young doesn’t seem important, but it really is; with a Roth IRA you’ll be able to save for the future without much effort. But the big key to saving is interest, and if you can leave your IRA account alone interest will continue to accrue every year at 8%. Over the life of 40 years, your IRA will multiply by 8 times, and if you put in enough there’s no limit to what you can achieve!
How Compound Interest Works
Most of the time, compound interest is out to get you, but in the case of your Roth IRA you’ll be able to finally turn the tables in your favor! Compound interest works like this:
- You open a Roth IRA account with $5,000
- Each year that passes your account will gain a modest 8%, or $400 dollars
- After five years, your account is now worth $7,000 instead of the original $5,000, all because of a one time contribution.
- After 40 years, your account is now worth $210,000, $160,000 of it accruing interest on the original $5,000 dollars (the rest compounding). Depending on how your Roth IRA is being handled, you can have even more gains.
Starting While You’re Young Gives You the Most Money
When you start investing when you’re young, you’ll be able to maximize your compound interest gains on your account. If you start when you’re 18, you’ll be getting 8% for 40 years instead of 20 when you’re 38. You have to start saving as early as possible, and you’ll be able to maximize the gains from your Roth IRA. Save your money the right way and build security for yourself that you need today!
A Roth IRA Maximizes Benefits
The best thing about the Roth account is that you can have as much money INSIDE the account, while you’re only limited to contributions. With $5,000 put in every year for a period of ten years, you’ll end up with a tidy sum to retire on. There’s no reason you can’t start saving now, and why put off something for tomorrow that you can do today? Invest in a Roth IRA today!