The current maximum IRA contribution is $6,500 per year. If you put that much into a Roth IRA every year, invest in an index fund, and get a 10% rate of return (about the average the US stock market has provided the last 100 years), and leave it to grow for 40 years you’ll end up with a cool THREE MILLION DOLLARS. Oh, and it’s 100% tax free too!
The IRS is a little nice with their annual deadlines. Instead of cutting you off on December 31st for that tax year, they give you until tax day to make the previous year’s contributions. So if you haven’t contributed the $6,000 maximum contribution for 2022 you may want to get on that in the next week!
When you contribute between January 1st and tax day (usually around April 15th), you’ll see an option on your brokerage website. It lets you choose if you’re contributing for this year or last year. Always choose last year until it’s filled up. Those contribution limits are use it or lose it so try to fill it up before that option disappears on April 19th!
WORD OF WARNING. An IRA is not an investment. It’s just an empty account. After you put money in, you have to INVEST IT. That usually involves clicking a “trade” button, and buying an index fund. If any or all of this is confusing to you, check out my free “start here” video series on the home page of my website.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
