Are You Missing $542,830 by Not Investing in an IRA?

There are far too many people who don't think an IRA is worth it. Many young people are the worst at investing for their retirement. Many of them simply don't think of investing in an IRA, or might not know that they are eligible or meet an age requirement. The fact is as long as you have taxable income, you can contribute to a retirement account. There is no minimum age requirement. Unfortunately, retirement planning can often take a back seat for the younger generation. Who can blame them when there are iPhones and Playstations to be bought? Investing for your retirement while you are young is one of the best strategies you can possibly have. Unfortunately for investors who don't figure this out in time, it's going to cost them a lot of dollars.

The sooner you start, the more you may have. The figures can be staggering when you calculate what you will have in the future. Let's look at an example. Let say you put $3,000 a year in an IRA starting this year. At the end of 30 years you would have $542,830 assuming a 10% rate of return and no withdrawals. If you waited just five years, your balance in 25 years will be 40% less - just $324,545. That is a large difference. It's almost hard to believe.

This incredible difference is because of compound interest. Interest is paid not only on the original capital but also on the interest that has been reinvested. You are earning money on the money they give you via the interest payments. The increase doesn't go up in a straight line like you may think, it goes up geometrically. A geometric increase goes up in a curved line that increases in steepness as time goes by.

This country offers an incredible array of goods and services that are crying out to be bought. We are bombarded by advertisements day and night 365 days a year. It's easy to see why young people would rather buy the "stuff" available to them then put their money into an IRA. For them, retirement is very far away. Besides, they think to themselves, I'll do it next year. It takes discipline to resist the urge to delay purchasing things and save money for investment purposes. Parents can help here by making investing a fun activity for all ages. Start you school age child on the road to investment by opening an IRA in their name. You do not have to put in the full $3000 a year. Take some of their earned money and have them put it into the IRA. Maybe as a young person starting their career, they will see the value and continue investing in their IRA account.

As a young person just starting out in life, the decision to invest takes discipline and courage. You have to forgo some "goodies", and you have to have the courage to believe in the American capitalistic system. The system that rewards investors who invest in solid companies for the long haul. For those of you who have that discipline and courage, you will be on the road to amassing at least one half of a million dollars down the road.