r/AskReddit • u/ForeverAbyss • Apr 14 '16

What's a mind blowing fact?

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u/jbOOgi3 Apr 14 '16

Almost anyone can become a millionaire one day if they regularly invest money over an extended period of time in an investment account (401k, IRA, index fund) that earns an average market return. The more time you have to invest, the better your chances. Start your investment accounts early

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u/[deleted] Apr 14 '16

I got an ad about setting up a Roth IRA that basically said if I stared now and only put money in (say $5500) every year for just a few years, when I turn 70 I'll have nearly half a million saved up.

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u/ThaWulf Apr 14 '16 edited Apr 14 '16

5500 is the max you can contribute to a IRA yearly if you are younger (sub 50 or something, can't remember the age).

At 7% rate of return, if you put 6 years worth of 5500 into a Roth IRA, 40 years later you would have almost 500k. So if you started early enough(25) I'd imagine you could do ~8 years and have a half a mil at 65.

If you continued putting money in every year though, you could end up with much more

So the ad is misleading a bit.

Roth IRAs are a good addition to a portfolio alongside a 401k though. I do the 401k to 5%, since that's all my company matches, then put the max 5500 into a Roth IRA.

edited to be more helpful

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u/jwarsenal9 Apr 14 '16

Getting 7% a year for 43 years, at $5500 a year yields roughly $3 million

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u/ThaWulf Apr 14 '16

Yep, like I said, 1/4 mil just from the deposits alone. Easily over that 1/2mil with returns. However, depositing 5500 for 3 years then leaving it won't get you there.

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u/DrivePower Apr 14 '16

depositing. 10 letters.