Roth IRA deadline. 3 months to go

3 months to go.  Are you ready?  Your Roth IRA is waiting.  The past 3 months I have been sharing the rules for a Roth IRA.  This month I will cover a unique way to get your account funded.

A quick recap

1. You need earned income to fund a Roth IRA

2. You can contribute $5,500 per year.

3. Contributions can always be withdrawn tax-free

4. After you turn 59.5 you can take all the money out tax-free

 

It’s W-2 season.  Let’s cover a new rule for low-earners.   If you made less than $5,500 you can only contribute the amount you made last year.   So, anyone who made $1,000 can contribute up to $1,000.  Now, you may be thinking, why would someone contribute to a Roth IRA if they only made $1,000.  How would  they make ends meet?

You might know someone like this.  Maybe a child or grandchild who is in high school and worked retail.  If they get a W-2 they can have a Roth IRA.  What would happen if you gave them the $1,000 to put into a Roth IRA account.  What a great gift — 60 years of tax-free growth and an education on why Roth IRAs are the best wealth creation tool.

Let’s fast-forward a few years.  Remember when you were just starting out?  Or maybe you are the one starting out? When I graduated from college, I moved to a new city got my first apartment and had to buy a wardrobe (Hey we wore suits and a tie every day at the bank.  It was called business dress.  You could probably read about it in Wikipedia.)

Putting money aside for retirement was the furthest thought I had for my money.  However, my company offered a 401(k) with a great match.  If I put in 4% they matched with 6%. I did not hesitate to find 4% of my earnings and I was on my way to building wealth by turning 4% of my income into 10% retirement savings..

Today most 401(k) plans are not as generous, but let’s think about that match that helped me save. You could offer to match contributions.  Maybe dollar for dollar?  This does not have to be for your children, so think about your nieces, nephews, or other young adults getting started.

If you are the young adult, why not ask for some help with your IRA funding?  You can use the information you have learned from this monthly series and make a request from  family or a family friend.  You never know if you do not try.

This month think about someone you can help.  What a great legacy you could leave in both money and knowledge.

Next month we will start to talk about where to open a Roth IRA account.  We have until April 15, 2014 to make a Roth IRA contribution for 2013.  That’s just 3 months from now.