Roth IRAs for Young Adults

Roth IRAs for Young Adults

January 22, 2021
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We believe there is truly no better time to start investing than right now. And that the more time you have to invest, the better!

As a young adult, you likely have more time and energy to put into learning about ways to start building the retirement of your dreams.

A great way to start investing is with a Roth IRA.  With a Roth IRA, you can start investing if you have “earned income” whether that is a full time or part time job. You can even start before you are 18 (as long as your parents are willing to help you open an account). Your parents would become the custodial guardian until you turn 18. While the funds belong to the child, the parent controls the account until they are legal adults. This means you can start investing as soon as you make your first dollar! The potential power of compound interest along with tax free withdrawals can work in your favor, all you have to do is start. 

Now you may ask, what is a Roth IRA? A Roth IRA is an individual retirement account that offers tax advantages including tax-free growth potential on your investments and tax-free withdrawals in retirement! That means you can pay your income tax now (most likely at your lower bracket) and take out the same money plus all those earnings in retirement when your tax bracket will probably be much higher.

Roth IRAs can be a great choice for young adults because at this point in your life, you’re probably in a lower tax bracket then you will be when you retire. The goal is to leave the money you have invested and continue to invest in your accounts for as long as possible so you can reap the potential rewards of compound interest.

Young adults should consider opening a Roth IRA as soon as possible. Think of all the growth you could achieve if you leave your investments and keep investing towards tax-free growth for years to come. With some patience and the power of compound interest, you can be on your way to funding the retirement you’ve always dreamed about.

 

This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Roth IRA contributions are subject to income limitations. You may take nontaxable withdrawals before age 59½ if the Roth IRA is held for at least five years and you meet certain distribution guidelines. Otherwise, an early withdrawal before age 59 ½ may be subject to taxes and a 10 percent federal tax penalty. Please consult with tax and financial professionals regarding your personal situation prior to making any financial related decisions. Investing involves risk, including the potential loss of principal.  (01/21)