Get Wealthy With Un-Sexy IRAs
Investing is the single most effective tool for becoming wealthy.
Becoming a good investor is a skill. Start simple, educate yourself, and build from fundamentals. For most Americans, one of the most accessible and useful tools are retirement accounts. You can start small, you can ramp it up, they give you tax benefits, and if you move across the country they come with you.
Back in the 1970 the Feds legislated the creation of the Individual Retirement Account. IRA’s were created to incentives individuals to invest early and prepare for their non-working retirement years. Since then, retirement accounts have proven to be one of the most effective and wide reaching method of investing the country has ever seen.
The No-Thinking Strategy
Academics put the investing market under the microscope, looking for what actually works. Turns out, the biggest hurdle is the first one: getting people to invest money regularly. The retirement accounts fell ass-backwards into the most effective solution found so far.
They took the ‘people component’ out of it.
Setting up an automatic transfer is hands down the most effective ways to get the money into an account where it grows. Otherwise is sits in a checking account where it shrinks, or gets spent and disappearing entirely.
You do a little work upfront to set it up, flip the switch, and check up on it once a year.
Now you’re an investor.
What most people do is they argue back and forth about this investment or that investment.
Know what they do next? Absolutely nothing. They quietly go into information overload, distract themselves with some videos online, and forget about it for another year.
The best investment is the one you actually make.
The true power behind investing is time. A good investment today is miles better than a great one a few years from now.
After a month, you won’t even feel the difference. Money will move out of your bank account, move into your investing account, and will grow all on its own. Five years from now you’ll listen to those same people arguing about the “right investment” and you’ll be miles ahead of the curve.
Why You Don’t Need To ‘Play The Market’
You’ve heard the folk wisdom: “The Best Time To Plant A Tree Was Ten Years Ago. The Second Best Time Is Today.”
Yes, this is drilling the value of investing for the long term into your skull.
But there’s a second lesson. You see, things aren’t always so good for Mr. Tree.
Some years it’s bright and sunny with lots of water. Some years there’s a fire. Some years there’s a drought. Yet in ten years, the tree is tall and strong. Why? Because through good times or bad, the tree stays right where it is. Things average out, and the tree still grows.
In investing, they call this ‘Market Volatility.’
Sometimes the market is running smooth and everyone is making money. Sometimes it runs hot and people start getting crazy. Sometimes it runs cold and people panic. People forget that things go up, and things go down. But over the long run, things go up.
IRA’s are meant for the long term. The longer they run, the less they care about how much the market goes up or down in a year, or even ten years. Averaged over time, your tree grows steadily.
Dodge The Taxman
The IRS allows taxpayers to contribute $5,500 over the course of 2017 into Traditional or Roth IRAs. Taxpayers over 50 can contribute $6,500.
What’s the difference between a Traditional IRA and a Roth IRA?
Traditional IRAs give you a tax deduction in the year you put the money in the account. You pay no tax today, then pay the tax when you pull the money and interest out when you retire.
With Roth IRAs you make contributions with after-tax earnings, and when you retire you get pull the money and the interest out tax-free. So you pay tax now, but not later.
Why the difference? The short answer is that they both work well in the big plan, but some people might like to take advantage of one-or-the-other depending on their unique situation. Either way, your money grows. Uncle Sam still gets his cut, but the slice isn’t as big as it would be in non-retirement accounts.
IRAs are unique in that you’ll never outgrow them. Experience or inexperienced, young or old, they will always be a tool for you to use for growing wealth and living the good life. Setting up an account with an automatic transfer can be done by the end of the week and will be an excellent start in your accumulation of wealth building assets.