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Author: latescrambler Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 269  
Subject: Re: Help- New Investor Date: 8/4/2001 7:07 PM
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A worker who is nineteen and a half years old and who invests $2000 in a ROTH IRA on the first day of each year in investments that grow an average of 10% per year will be able to retire in forty years with an account valued at approximately $991,000. That worker will be able to draw down payments from that ROTH IRA without any federal taxes owed, although there may be state and local taxes. Not a bad deal. $80,000 saved over 40 years at 10% grows to $991,000. Doesn't seem possible.

If the ROTH IRA account grows at 12% per year the balance -- free of federal taxes -- after 40 years will be worth about $1,718,000. ($80,000 invested + $1,638,000 growth at 12%). Not a bad deal.

A growth rate of 15% will result in a balance of $3,090,000, free of federal taxes when drawn out. Those who do the math, soon get the idea that compound interest -- which Einstein called the "greatest invention" -- adds up. The only problem is that the young think they'll live forever and don't realize the effect that steady saving and/or investing can have on their ability to be independent. People who save/invest more than $2000 a year will have even more than the figures shown above.

If you are putting in the max on your 401K and an IRA, you're already doing the right thing -- assuming your investments are diversified and are being soundly managed.
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