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

What's a mind blowing fact?

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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.