Learn more about moneyandinvestments with this collection
How to create a diversified portfolio
How to analyze stocks and bonds
Understanding the basics of investing
Max out your Roth IRA every year
Simply contributing the current annual maximum to your Roth IRA of $6,000 from age 22 to age 67 makes a world of difference for two reasons.
First, Roth funds are shielded from future taxes: money in a Roth has already been taxed and will never be taxed again.
Next, if you choose to invest in low-cost index funds in your Roth, the account won't require any ongoing maintenance and you won't need to spend any time picking and choosing investments.
Make the annual Roth contribution a habit as early on in the calendar year as possible and make sure it happens every year.
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Make use of your 401(k) up to the match
This money will grow tax-deferred: that is, you'll receive a tax deduction today and won't pay taxes again until you withdraw the money in retirement.
If we take the two intermediate-return scenarios, not only would you end up with $3 million, you would end up with far more. This is simply due to the power of compound interest applied over long periods of time. In other words, the sooner you start investing money in tax-advantaged vehicles, the sooner you'll see a runaway compounding effect.
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