Roth IRA in 60 seconds: One Minute for the Rest of Your Life
7 things you actually need to know about America's favorite retirement account
- Roth IRAs are tax-advantaged accounts. Any deposits you make come out of your post-tax income, so when you withdraw money after age 59 1/2, you're not taxed on that withdrawal.
- You can contribute a maximum of $6000 per year to your Roth IRA. If you make less than $6000 in a year, then you can contribute the amount of your taxable income for that year. If you're over 50, you can contribute $7000 per year.
- Vanguard, Fidelity, or Charles Schwab are the best places to open a Roth IRA for most people.
- When you open an account, you're not automatically invested in anything. Opening a Roth IRA is kind of like opening a checking or savings account. You have to deposit money, then pick funds or stocks to purchase within that account.
- What should you invest in? A total stock market index fund. It doesn't need to be more complicated than that. Total stock market returns + lots of time = the magic of compound interest.
- Don't get fancy. Once you have your monthly investment set up, don't touch it, don't look at it, and please don't try and time the market. Let compound interest work its magic over the next few decades and retire with dignity.
- That's it. This isn't everything there is to know about Roth IRAs, but it's about all you need to get results.
I'm just a random person with a blog on the internet, and laws change. Please do your own research. Check www.irs.gov for detailed updated information.