(PUB) Investing 2016

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ROTHS Making an Early Retirement

LOTS OF US TALK about taking an early retirement, but how about making one? In particular, how about making one (or at least starting one) for a young family member or friend? Year after year, when I suggest that you or your parents should open an IRA for your teen or grand-teen, I hear from FFSA members, friends, and even fam- ily who say, in a nutshell, “Great idea.” And it is. Helping a young person get on board the retirement train may not get you lots of appreciation today, but trust me, the beneficiary of your for- ward thinking will thank you for years to come as they move into adulthood. I’ve lost track of whether we now refer to them as Millennials, Gen Ys, or Echo Boomers, but what I think of as the Internet generation is a massive group of teens and 20-somethings who could always benefit from a swift kick in the pants when it comes to planning for retirement. I know it sounds a bit crazy to talk to teenagers about retirement and IRAs. I can hear the howls of derision. “Retirement? Who are you kidding?” Most kids are, not surprisingly, more interested in Instagram and WhatsApp than they are in retirement. In fact, given a choice, they’d probably prefer taking out the garbage or doing the dishes. But that shouldn’t stop you from try- ing to pique their interest in the basics of personal finance, and yes, even per-

Roth IRAs Age Well

$1,000 A Year $1,000 $24,673 $225,508 $417,822

$2,000 A Year $2,000 $49,345 $451,016 $835,645

$3,000 A Year $3,000 $74,018 $676,524 $1,253,467

$4,000 A Year $4,000 $98,690 $902,032 $1,671,289

$5,500 A Year $5,500

Gradual Increase

Age

15 30 60 70

$1,000 $37,284 $612,935 $1,174,517

$135,699 $1,240,295 $2,298,023

Assumes a 6% annual rate of return.

jobs, you may be able to make a mean- ingful impression on him or her. Then, next March and April, you can tote up what Mr. or Ms. Millennial earned in 2016 and fund that IRA account before the April 15 deadline. I know that it would be nice if junior spenders could take on this chore them- selves, but how many teens do you know who read investment newsletters? And if they did, where would they get the money to stash in an IRA? Most spend what they make, and then some. That’s one reason I believe the world invented parents (and grandparents). When I first opened an IRA for my then-teenaged son, both he and my wife looked at me like I’d just announced my intention to join the Marines. My daughter just smiled and kept reading her book. The joke is on them, of course. Thanks to me matching my son’s sum- mer earnings and putting the money away in a Roth IRA, the now married 31-year-old has already built up a tidy

sonal financial responsibility. A few years ago, I helped a number of then- 25-year-old friends of my daughter with some fundamental financial and investment planning. They needed it; they knew they needed it; and they were very appreciative of the help. In fact, one of them wrote a blog post about it, then went on to put her money to work for her future. I’ve been asked by more of these 20-somethings to do it again, and to broaden the audience. It’s too bad more people don’t help the young get started early on their investment careers, because the perfect time to learn about saving and invest- ing is when your portfolio is small enough that your mistakes won’t kill you. Also, it’s a time when a new investor can begin to develop lifelong habits that will stand them in good stead as they pass through their 30s, 40s and beyond. Time is on a kid’s side, and by help- ing one start to build a Roth IRA with earnings from summer and part-time

Real Compounding: Total Stock Market

Real Compounding: Total Bond Market

Real Compounding: Wellington

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000

$1,000 per year $1,500 per year $2,000 per year $2,500 per year

AGE

12 • Fund Family Shareholder Association

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