• Stephen Mulholland, CFA


“I wish that I knew what I know now when I was younger,” Faces, Ooh La La

If you are under 21, enterprising, and generating income you should have a Roth IRA. While you cannot have a 401K until you are 21, thanks to Congressman William Roth's actions in 1997 you can open a Roth IRA.

Here are the basics:

* After tax contributions can be withdrawn tax and penalty free anytime

* Earnings can be used for college and graduate school tax and penalty free anytime

* $10,000 of your earnings can be used tax and penalty free to purchase a home

* Earnings can be drawn penalty and tax free after 59.5

* In 2020 you can put away up to $6,000 a year

* The contributions have to come from activities that generate earned income: lifeguard at a water amusement park (my first job at 14); a paid internship; baby sitting; washing cars; etc.

Everyone knows the power of savings, compounding, and deferring taxes. However, not everyone takes full advantage of the menu of investment vehicles. The biggest reason why is probably the somewhat mistaken notion that you cannot touch the money until you're 60. So, for the rest of this post I will try and help you to see that this isn't the case.

Let's say you work from 14 to 30 and put $6,000 a year into your Roth IRA. At 30, you would have a little over $100,000 in contributions that you could use for any purpose. Jeff Bezos asked his parents for $300,000 at 30 to start Amazon. Luckily for his family they had the cash and accepted. You can fund a third of that for yourself just out of your Roth. Not everyone is as lucky as Jeff to have parents that can write those kinds of checks. Why not pre-fund your future business venture yourself?

Alternatively, you can put that $100,000 towards a home. And that is just what you can do with the contributions. You would still have all of the earnings that $100,000 in contributions generated continuing to grow for you. Further, if you decide to go to graduate school you can use any portion of your Roth to fund it and stay out of crippling student debt.

There are myriad reasons people don't do things. For me, the saddest one is when they simply don't even know it's possible. If you are a young, hard working person, or a parent of one, now you know!

If you are interested to learn more, check out our podcast or shoot us an email at

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