Compound growth is such a beautiful thing when you let time work on your side. Saving $7,000 a year might not seem like it could make you a millionaire. But keep investing this amount consistently and future you will be sitting on a seven figure account.

There will be some people that say in 30 years, $1.3 million in our example won’t even be able to buy a gumball thanks to inflation! Well, we did the math. Taking inflation into account, the portfolio would be worth just under $850,000 in today’s dollars. Still not too shabby!

Roth IRAs are a type of retirement account where you can invest your money and get tax benefits. There is a max that can be contributed to a Roth IRA each year. It’s currently at $7,000 in 2024. This number is increased by the IRS every couple years about.

The downside is there are income limits. If you make over $161,000 single or $240,000 married filing jointly, the IRS doesn’t allow you to make contributions into a Roth IRA. (there are phase out income levels below this).

If your income is above the limit, consider doing a backdoor Roth IRA! It’s a (legal) loophole where you contribute *after-tax* money into a traditional IRA and then convert it to a Roth IRA.

HOWEVER, be careful when doing this because you may be subject to the “pro-rata” rule. This means that if you have untaxed money in a traditional IRA, you are not able to ONLY convert the new after-tax money. A proportion of the untaxed money will also be converted into a Roth IRA, which you’ll then have to pay tax on.

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎

‎-Vivi & Shane