The world today is all about instant gratification. We have to be constantly entertained television, music, twitter the buzz is never ending. Between work, school, kids, wives, husbands, commuting, and so much more it can be hard to step back and see the bigger picture. It is for this reason that many people are not making the most out of their financial investments. When it comes to money, there is no area of our lives where we seek more immediate satisfaction. We want to make tons of money and we want to do it as quickly as possible.
While this notion is certainly desirable, in most cases it is simply not practical or realistic. In the grand scheme of things, only a very small portion of the population has successfully “struck gold” at a young age. Learning to accept that, for the most part, wealth comes with time is the first step to really making the most of your financial investments. While Steve has touched on this subject in the past, I would like to propose that today’s poor economic climate makes a Roth IRA one of the best options you have to maximize your payout in the long run.
To give it to you bluntly, a Roth IRA is not going to make you rich quick. It’s just not going to happen. Starting a Roth IRA (Individual Retirement Account), however, is one of the smartest moves you can make (especially if you are able to do so at a young age). With a Roth IRA, an individual contributes money to an account and that money is locked in to this account until you are of retirement age. While you will not be able to access the money you have invested until you are over the age of 59, the money does grow tax-free and at a high interest rate. So, rather than have money sit in a savings account with (outrageously) low interest rates, opening a Roth IRA allows investments to earn significantly more.
There are a few restrictions associated with opening a Roth IRA. Not everyone qualifies. If your tax filing status is single and you make more than $95,000 a year, your contributions are restricted. If you are married and your household income is more than $150,000, your contributions are also limited. Otherwise, an individual who is under the age of 50 must contribute at least $5000 dollars and an individual over the age of 50 must contribute at least $6000 in order to open a Roth IRA. Roth IRA’s encourage people to save money for when they are no longer working, by offering them a significant tax break. Without access to the money, there is no temptation to use it on frivolous expenses. The money will accumulate and set you up to be in a great financial position when you are older.
The biggest problem that people (especially younger people) have with money is saving it. Living in a fast paced world where extravagance is celebrated, does not translate well to saving and investing money for a long term payout. A Roth IRA is a great option for today’s economic climate because bank interest rates are at such an all time low. Moreover, the Roth IRA forces an individual to give up the “satisfaction now” mindset and encourages them to work towards their future.
This guest contribution was submitted by Pamelia Brown, who specializes in writing about associates degree. Questions and comments can be sent to: firstname.lastname@example.org.
Photo courtesy of taxfix.co.uk