THE POWER OF ROTH IRAs
01.Core Concepts
• Contribute $7,000 to a Roth IRA at the end of each year from age 19 to 30 (assume 12 contributions are made); 8% investment return • PMT = $7,000 • i= 8 • N = 12 • Solve for FV = $132,839.89 • Stop contributions at age 30 but allow balance to grow for 35 years (to age 65) • PV = ($132,839.89) • i= 8 • N = 35 • Solve for FV = $1,964,083.51 • Subtract amount invested • $1,964,083.51 - $84,000 = $1,880,083.51 of tax-free earnings Tax-free withdrawals from Roth IRAs do not increase taxation of SS or cause higher Medicare Parts B & D premiums