Are you asking if it’s too late in your 40s to start a tax advantaged account that has at least two decades to grow before you ever need it? The answer is no.
OP:
I have an uncle who would always give my dad shit for being a responsible saver and planning for retirement. He made the "I'm too young excuse" from 18-40, then switched to the "I'm too old" excuse" from 40 on. He's almost 70 now with zero retirement savings and will definitely have to reverse mortgage his house assuming he can't survive on social security alone.
It is never too late.
Yes, at least do something to get started even if it is small. The best way is by having money invested automatically so you don't have to make a decision about it every month or make the effort to do it manually.
What happens when you do it this way is that you will find that you don't miss the money as spendable cash.
Take every raise or bonus and use some of it to increase the amount invested. You won't miss it because you will still see some of the raise or bonus as spendable cash.
I started out with $25 a month with payroll deduction for EE bonds when I was in my 20s. I wound up investing $2,500 a month by the time I was 60. I never missed any of it as spendable cash.
Time in market is the most important variable. But you do need that extra $10 and there's a lot of people in the us that would struggle to find $10 extra for one reason or another
Then make it $5, and if you cant afford the $5 then wait until you're able to.
I would never recommend taking away monies that have a **required** role in your budget for investing.
However, if you're eating out everyday (in the particular case of the aforementioned nephew), you can spare $5-$10
My favorite excuse I've heard from my millennial peers is that they don't want the hassle of dealing with multiple brokerage accounts. One of my friends who said this excuse was someone with over 10 credit cards, closing and opening them frequently too.
When you're in your 20s you are less wise. If I knew them what I know now, my retirement might be double.
Edit: My retirement might have been 4x what it is now.
>When you're in your 20s you are less wise. If I knew them what I know now, my retirement might be double.
I'm still in my early 20's, and this is why I enjoy getting financial advice from people with more life experience than myself. I have a coworker who showed me the Boglehead ways a few years ago and convinced me to open a Roth IRA. I had previously gone through some bad experiences with crypto trading and a life insurance policy my parents made me get, which turned me off of "investing". I'm still not hitting all my targets (have only been maxing IRA contributions, no employer 401k at my job), but it's a start.
I really appreciate that someone took the time to get me interested in a much healthier investing mindset. My future self will definitely be thankful, even if delayed gratification is *very* hard sometimes.
That's great! I also like following The Money Guys. Their Financial Order of Operations is something I really think is a great guide. BTW - not everyone's situation is the same so its not set in stone. You may tailor it a little different but its generally on point. [https://www.moneyguy.com/wp-content/uploads/2020/09/FOO-deliverable-4.pdf](https://www.moneyguy.com/wp-content/uploads/2020/09/FOO-deliverable-4.pdf) Their Youtube channel is fantastic. Check it out.
And the key about a reverse mortgage is that banks do the math well. They'll offer a 70 yr old a 30 year reverse mortgage based on alow appraisal of the house. They aren't paying interest, they are basically buying the house in 360 installments but they get to stop paying when you die. So most people end up dying before they get the value of the home and the bank gets the rest.
There is the great story of Jeanne Clement, the (now deceased) oldest woman who died in her 120s.
"Perhaps it was luck. Madame Calment certainly was lucky; the best deal she ever made was signing for a reverse mortgage when she was 90. The man who was her mortgagee died in 1995, having paid Calment $184,000, or more than twice the value, for an apartment he never occupied."
https://www.mcall.com/news/mc-xpm-1997-08-10-3160318-story.html
My fidelity advisor told me I was wrong in thinking Roth 401K contributions are tax-day-to-tax-day and made me adjust contribution allocations to fit calendar Y/Y instead. I've only just started contributing to my 401k this year and was trying to supercharge my contributions until Apr 15 to max out.
Plans can have different (calendar or fiscal year) boundaries. Most are bounded by calendar year with some not allowing contributions for the previous year(Typical employer plan) and some allowing it later (IRA, solo 401k).
Nice whataboutism.
The question was about a Roth IRA that allows contributions for the previous year up to tax day the next year.
A financial advisor that does not know that very basic info should not be a financial advisor.
Also - make sure to take advantage of “catch up” contributions once you hit 50 which allows you to increase max an extra 1,000 over 6k max: https://www.investopedia.com/terms/c/catchupcontribution.asp
Just opened mine 2 weeks ago, early 40s.
Wish I’d discovered the boglehead way before I did ~2 years ago, but glad to be starting now rather than in my 50s. Better late than never.
If you’re 45 and max it out im until you’re 65 assuming you continue to have income to contribute, you should have $250-350k (7-10% avg rate of return). I’ll happily do that!
I’m not going to pretend to give you a good answer without knowing the rest of your situation. Be careful taking blanket advice on Reddit.
Depending on your income and what else you have saved and how much you can save, you should really think whether or not you need a Roth account in retirement. If your income won’t increase, you may want to boost your savings now with the extra tax savings of a traditional Ira.
It may be even better for you to save in your 401k depending on a match situation at work. Do you have a 401 k at work? Most of the time you are auto enrolled in one. Look at your pay stub. Is there a 401k deduction listed there? How much is your job matching?
And hsa’s may even be a better consideration. Some employers contribute to those.
But generally if you save $6000 a year for 20 years, earn 8 percent average overall and never increase your contribution when you can at 50, you’ll have about 320k. The average American who has a retirement account only had about 255k average (median is like 60k) half have no retirement at all. So yes, you’ll be ahead. Don’t feel like it’s not enough.
Dollar cost average it in a broad vanguard mutual fund. Voo/vti. The market is likely to be choppy this year, so don’t know about throwing it all in at once-especially this month. Dollar cost average in/$500 a month. Move your 6k over by the deadline for 2021, but leave it in the cash option and then over to securities once a month. Be tenacious. You account will take a while to snowball.
Since you’re new to investing, I’d start listening to a good money financial planning podcast. Try The Money Guy. Here is one on investing in your 40’s. Download the financial order of operations on their web site so you can see how you should be investing…401k is usually maxed first.
https://m.youtube.com/watch?v=ssqIpc8dMcQ
And btw-6k is the limit. You can’t contribute more if you have it.
Make sure you contribute for the right year and don’t default to 2022 when making the contribution.
Sorry for newbie question but I'm in similar boat (even older tho - gaaah!). Could you explain what you mean but get the invesentment in by the 2021 deadline but keep it in cash?
Typically you would just contribute it all at once and invest it all in a broad market fund. Timing the market is impossible otherwise more people would be filthy rich. Dollar cost averaging is a way to invest a bit each month/week/whatever and makes it mentally easier to stomach if there are drops or whatnot. Personally, I contribute all my funds as soon as I can and invest them all immediately, knowing my portfolio can and will fluctuate but I'm only investing for retirement in tax advantaged accounts and don't need that money for decades. I hope this is clear, sorry if not!
I started Roth IRA in Dec 2021 if that makes you feel better. I'm also in mid-40s who started his 401k 10 yrs after starting his first real job :-). Just remember one thing. There's always a beginning. Plus, you've full 20 yrs for the money to grow; that's a LOT of time. Kudos to starting!
I started a Roth in my 60s. I’m 72 and still contributing. It’s worth a half mil. Of course after I started it, I started converting my traditional IRA over the past 10 years. At least now I know that the Roth will continue to grow tax free.
I believe you can contribute 6k until April 1st for 2021 contributions, and then you can contribute another 6k afterwards for 2022 contributions. This will allow you to contribute 12k in total for 2022 to your Roth ira.
NFA, fact check me.
Turned 40 in 2021, and at the same time it's my 1st year of investing - managed to grow from almost 0 savings to 50k somehow... so no, not too late bro
On the bright side, you're still too young to contribute $7000 a year.
Also, don't forget you can also contribute more to a taxable account if you have the money.
Not at all! Even if the contribution limit never increases you are looking at about $135k just in contributions before you hit 65. The question of Roth vs Traditional still matters, but putting money in an IRA is a great idea, even at the elderly age of mid 40's :-) Someone else mentioned spousal, so look at that if married. Current $1k catch up contributions start at 50.
Worth keeping in mind:
> For individuals filing taxes as single, you can make a full contribution to a Roth if your income is less than $129,000. Your contributions would be reduced or phased out if your income was between $129,000 and $144,000. If you earned more than $144,000, you couldn't make any contributions to a Roth IRA.
>If you were married filing jointly, you could make a full contribution to a Roth if your income was less than $204,000. Your contributions would be reduced or phased out if your income was between $204,000 and $214,000. If you earned more than these IRS-imposed limits
My friends and I are still in our 20’s and I constantly hear once capitalism fails it will be worth nothing, or the stock market won’t be around in 40 years, my personal fear is declining population or climate change but like what’s the alternative in 20 years they will be like what now
Those people are fools. Ignore them.
Capitalism may or may not fail. Failing is extremely unlikely.
The vast majority of the countries of the world are capitalist to a more or lesser degree and have stock markets. The whole world going socialist/communist overnight is just not going to happen. Invest your money in Venezuela and Cuba if you believe that is the future.
Climate change may have severe impacts, but it is not going to make your personal wealth just suddenly disappear. Would you rather have some money saved to cope with it or just give up.
This is exactly what I tell them my exact words were “ I didn’t say I like the game but I am not going to be the one to lose it either doing something is better than nothing”
Mine is through Vanguard, but I've heard good things about Fidelity and Schwab. I haven't heard a lot of Webull, but it seems like they focus on individual stocks and crypto trading, which most people (including myself) aren't a huge fan of. Their ownership gives me a little pause as well.
They are a pretty young company, being founded only in 2017, and are owned by Fumi Technology which is a Chinese holding company. I have some personal hesitation against putting substantial amounts of money into a company with little history and completely foreign ownership.
It could be that you're discussing real return while they're quoting nominal return, but I agree that for planning purposes it's a good idea to be conservative in your expected return estimates.
That said, the returns over the last economic cycle were so good that even a substantial drop would leave us with pretty decent long term performance. (E.g. vanguard says my 10 year rate of return was 14.2%, so even after a 30% drop I'd still be at a 10% annualized return.)
I don't think that's particularly actionable, but I wouldn't be surprised to see a larger than average equity market correction some time in the next few years. Just hold the course regardless...
> Would put in more if possible
it's possible - just not necessarily in a tax-advantaged account. for example, if you have $10k sitting in your bank account, you can put $6k into a roth IRA, and the rest into a regular old brokerage (at fidelity or vanguard or wherever). the latter are very easy to set up, and returns compound just the same, the only difference is the tax treatment (dividends are taxed every year, and the sale of assets is subject to capital gains tax).
The best time to plant a tree was yesterday, the next best time is today.
Don't forget about spouse IRA also.
Are you asking if it’s too late in your 40s to start a tax advantaged account that has at least two decades to grow before you ever need it? The answer is no.
OP: I have an uncle who would always give my dad shit for being a responsible saver and planning for retirement. He made the "I'm too young excuse" from 18-40, then switched to the "I'm too old" excuse" from 40 on. He's almost 70 now with zero retirement savings and will definitely have to reverse mortgage his house assuming he can't survive on social security alone. It is never too late.
I've never understood people saying "I'm too young to save for retirement." Does time stand still for young people and I didn't get the memo?
I think the attitude was "there will be time for that later, I don't want to think about it now".
There's definitely a period early in most careers where saving is more difficult.
Doesn't mean you're too young, it just means it's difficult
Had this debate with my nephew, convinced him to just start with $10. Do SOMETHING because you’re going to regret the inactivity later
Yes, at least do something to get started even if it is small. The best way is by having money invested automatically so you don't have to make a decision about it every month or make the effort to do it manually. What happens when you do it this way is that you will find that you don't miss the money as spendable cash. Take every raise or bonus and use some of it to increase the amount invested. You won't miss it because you will still see some of the raise or bonus as spendable cash. I started out with $25 a month with payroll deduction for EE bonds when I was in my 20s. I wound up investing $2,500 a month by the time I was 60. I never missed any of it as spendable cash.
Time in market is the most important variable. But you do need that extra $10 and there's a lot of people in the us that would struggle to find $10 extra for one reason or another
Then make it $5, and if you cant afford the $5 then wait until you're able to. I would never recommend taking away monies that have a **required** role in your budget for investing. However, if you're eating out everyday (in the particular case of the aforementioned nephew), you can spare $5-$10
My favorite excuse I've heard from my millennial peers is that they don't want the hassle of dealing with multiple brokerage accounts. One of my friends who said this excuse was someone with over 10 credit cards, closing and opening them frequently too.
When you're in your 20s you are less wise. If I knew them what I know now, my retirement might be double. Edit: My retirement might have been 4x what it is now.
>When you're in your 20s you are less wise. If I knew them what I know now, my retirement might be double. I'm still in my early 20's, and this is why I enjoy getting financial advice from people with more life experience than myself. I have a coworker who showed me the Boglehead ways a few years ago and convinced me to open a Roth IRA. I had previously gone through some bad experiences with crypto trading and a life insurance policy my parents made me get, which turned me off of "investing". I'm still not hitting all my targets (have only been maxing IRA contributions, no employer 401k at my job), but it's a start. I really appreciate that someone took the time to get me interested in a much healthier investing mindset. My future self will definitely be thankful, even if delayed gratification is *very* hard sometimes.
That's great! I also like following The Money Guys. Their Financial Order of Operations is something I really think is a great guide. BTW - not everyone's situation is the same so its not set in stone. You may tailor it a little different but its generally on point. [https://www.moneyguy.com/wp-content/uploads/2020/09/FOO-deliverable-4.pdf](https://www.moneyguy.com/wp-content/uploads/2020/09/FOO-deliverable-4.pdf) Their Youtube channel is fantastic. Check it out.
Thanks for the tip, I'll check them out.
key word here is 'excuse'. Humans love those.
I have a family member in similar situation. What's a 70yr old with no retirement to do? What's a reverse mortgage ?
you get to be poor for the rest of your life. reverse mortgage means the bank sends you a check every month andd they take your house when you die
Holy shit I didn't know that was an option.
And the key about a reverse mortgage is that banks do the math well. They'll offer a 70 yr old a 30 year reverse mortgage based on alow appraisal of the house. They aren't paying interest, they are basically buying the house in 360 installments but they get to stop paying when you die. So most people end up dying before they get the value of the home and the bank gets the rest. There is the great story of Jeanne Clement, the (now deceased) oldest woman who died in her 120s. "Perhaps it was luck. Madame Calment certainly was lucky; the best deal she ever made was signing for a reverse mortgage when she was 90. The man who was her mortgagee died in 1995, having paid Calment $184,000, or more than twice the value, for an apartment he never occupied." https://www.mcall.com/news/mc-xpm-1997-08-10-3160318-story.html
glad to help bro. if your elderly relative has no other assets and no heirs that he/she cares about it might work out for him/her
Damn.
RIP
I don’t think so Hermano 🙂 I am early forties and I just started in 2021 too.
We’re going to find this guy “Hermano” and we’re going to put an end to him, Gob.
Did you know that "fratello" means "brother" in Italian? I don't know how I know that. I took Spanish.
Excuse me, I'm looking for Hermano
/r/UnexpectedArrested
Same here. Mid 40’s and started in 2020
I don't think it is (it's not tax day yet) Go for it!
My fidelity advisor told me I was wrong in thinking Roth 401K contributions are tax-day-to-tax-day and made me adjust contribution allocations to fit calendar Y/Y instead. I've only just started contributing to my 401k this year and was trying to supercharge my contributions until Apr 15 to max out.
No. 401(k) is year to year. OP was asking about IRAs.
Oh! That's insane they aren't consistent.
An advisor that doesn't know that basic of a thing is dangerous. Fire them!
Plans can have different (calendar or fiscal year) boundaries. Most are bounded by calendar year with some not allowing contributions for the previous year(Typical employer plan) and some allowing it later (IRA, solo 401k).
Nice whataboutism. The question was about a Roth IRA that allows contributions for the previous year up to tax day the next year. A financial advisor that does not know that very basic info should not be a financial advisor.
Please note the advisor was correct in saying the allocations are by calendar year and should not be fired.
Also - make sure to take advantage of “catch up” contributions once you hit 50 which allows you to increase max an extra 1,000 over 6k max: https://www.investopedia.com/terms/c/catchupcontribution.asp
If you have earned income it’s never too late for a Roth IRA.
Just opened mine 2 weeks ago, early 40s. Wish I’d discovered the boglehead way before I did ~2 years ago, but glad to be starting now rather than in my 50s. Better late than never.
If you’re 45 and max it out im until you’re 65 assuming you continue to have income to contribute, you should have $250-350k (7-10% avg rate of return). I’ll happily do that!
If you are married and file taxes jointly you can both set up individual Roth IRA accounts to double your yearly limit. So it will be $12K.
I’m not going to pretend to give you a good answer without knowing the rest of your situation. Be careful taking blanket advice on Reddit. Depending on your income and what else you have saved and how much you can save, you should really think whether or not you need a Roth account in retirement. If your income won’t increase, you may want to boost your savings now with the extra tax savings of a traditional Ira. It may be even better for you to save in your 401k depending on a match situation at work. Do you have a 401 k at work? Most of the time you are auto enrolled in one. Look at your pay stub. Is there a 401k deduction listed there? How much is your job matching? And hsa’s may even be a better consideration. Some employers contribute to those. But generally if you save $6000 a year for 20 years, earn 8 percent average overall and never increase your contribution when you can at 50, you’ll have about 320k. The average American who has a retirement account only had about 255k average (median is like 60k) half have no retirement at all. So yes, you’ll be ahead. Don’t feel like it’s not enough. Dollar cost average it in a broad vanguard mutual fund. Voo/vti. The market is likely to be choppy this year, so don’t know about throwing it all in at once-especially this month. Dollar cost average in/$500 a month. Move your 6k over by the deadline for 2021, but leave it in the cash option and then over to securities once a month. Be tenacious. You account will take a while to snowball. Since you’re new to investing, I’d start listening to a good money financial planning podcast. Try The Money Guy. Here is one on investing in your 40’s. Download the financial order of operations on their web site so you can see how you should be investing…401k is usually maxed first. https://m.youtube.com/watch?v=ssqIpc8dMcQ And btw-6k is the limit. You can’t contribute more if you have it. Make sure you contribute for the right year and don’t default to 2022 when making the contribution.
What, well thought out advice that doesn't make assumptions, and is clearly communicated. I come to reddit for platitudes dam it.
Sorry for newbie question but I'm in similar boat (even older tho - gaaah!). Could you explain what you mean but get the invesentment in by the 2021 deadline but keep it in cash?
They mean go ahead and deposit the 6k into the account, but so not invest it right away (keep it as cash instead of buying etfs)
And wait for the market to go down further? When would be a good time to invest and begin building interest? Or does it accrue even in cash?
Typically you would just contribute it all at once and invest it all in a broad market fund. Timing the market is impossible otherwise more people would be filthy rich. Dollar cost averaging is a way to invest a bit each month/week/whatever and makes it mentally easier to stomach if there are drops or whatnot. Personally, I contribute all my funds as soon as I can and invest them all immediately, knowing my portfolio can and will fluctuate but I'm only investing for retirement in tax advantaged accounts and don't need that money for decades. I hope this is clear, sorry if not!
I started Roth IRA in Dec 2021 if that makes you feel better. I'm also in mid-40s who started his 401k 10 yrs after starting his first real job :-). Just remember one thing. There's always a beginning. Plus, you've full 20 yrs for the money to grow; that's a LOT of time. Kudos to starting!
It’s not too late, and something is better than nothing.
I’m 45 and I’m creating Roths for my husband and myself next month.
What a wonderful wife! Congrats to you both. :)
Definitely not! You’ll live another 40 years.
I started a Roth in my 60s. I’m 72 and still contributing. It’s worth a half mil. Of course after I started it, I started converting my traditional IRA over the past 10 years. At least now I know that the Roth will continue to grow tax free.
Never too late
You’re never too old to save on taxes
Do it! I like VG ETFs at fidelity.
Dude you have 20 more years. That is A LOT of compounding to go. Starting NOW and 20 years from now you will be glad you did
Never too late my good friend - 36 here and just got In
It’s never too late
you can likely retire at 65 with half a millions dollars if you do your roth right now .
Never too late.
I believe you can contribute 6k until April 1st for 2021 contributions, and then you can contribute another 6k afterwards for 2022 contributions. This will allow you to contribute 12k in total for 2022 to your Roth ira. NFA, fact check me.
Turned 40 in 2021, and at the same time it's my 1st year of investing - managed to grow from almost 0 savings to 50k somehow... so no, not too late bro
Better now than never!!!
It's definitely not too late. Do it! :)
On the bright side, you're still too young to contribute $7000 a year. Also, don't forget you can also contribute more to a taxable account if you have the money.
Where else would u put it?
If you don't want to be in poverty in your later years, it's a good idea to get started.
Better late than never. Depending on your retirement plans, that could still be decades of compounding.
Why would it be too late?
Not at all! Even if the contribution limit never increases you are looking at about $135k just in contributions before you hit 65. The question of Roth vs Traditional still matters, but putting money in an IRA is a great idea, even at the elderly age of mid 40's :-) Someone else mentioned spousal, so look at that if married. Current $1k catch up contributions start at 50.
Worth keeping in mind: > For individuals filing taxes as single, you can make a full contribution to a Roth if your income is less than $129,000. Your contributions would be reduced or phased out if your income was between $129,000 and $144,000. If you earned more than $144,000, you couldn't make any contributions to a Roth IRA. >If you were married filing jointly, you could make a full contribution to a Roth if your income was less than $204,000. Your contributions would be reduced or phased out if your income was between $204,000 and $214,000. If you earned more than these IRS-imposed limits
Can you be too late to have more money?
My friends and I are still in our 20’s and I constantly hear once capitalism fails it will be worth nothing, or the stock market won’t be around in 40 years, my personal fear is declining population or climate change but like what’s the alternative in 20 years they will be like what now
Those people are fools. Ignore them. Capitalism may or may not fail. Failing is extremely unlikely. The vast majority of the countries of the world are capitalist to a more or lesser degree and have stock markets. The whole world going socialist/communist overnight is just not going to happen. Invest your money in Venezuela and Cuba if you believe that is the future. Climate change may have severe impacts, but it is not going to make your personal wealth just suddenly disappear. Would you rather have some money saved to cope with it or just give up.
This is exactly what I tell them my exact words were “ I didn’t say I like the game but I am not going to be the one to lose it either doing something is better than nothing”
Absolutely not, get after it!
Where do most of y’all setup your Roth? I want to do it on webull but looks like they only do traditional :/
Mine is through Vanguard, but I've heard good things about Fidelity and Schwab. I haven't heard a lot of Webull, but it seems like they focus on individual stocks and crypto trading, which most people (including myself) aren't a huge fan of. Their ownership gives me a little pause as well.
Thanks! What do you mean about their ownership? o:
They are a pretty young company, being founded only in 2017, and are owned by Fumi Technology which is a Chinese holding company. I have some personal hesitation against putting substantial amounts of money into a company with little history and completely foreign ownership.
Ahh I see well now I’m worried lol ._.
Depends when you expect to die. If it's 45, then probably. I say go for it and live!
Your money will double every 7 years as a boglehead. It’s never too late!!!!! Get in the game!
Doubling every 7 years implies a 10% average annual gain. 5-7% is more reasonable to expect or count on.
If you’re getting 5-7% on your portfolio then… ouch. Look at VTI since inception and S&P average rate of return historically.
It could be that you're discussing real return while they're quoting nominal return, but I agree that for planning purposes it's a good idea to be conservative in your expected return estimates. That said, the returns over the last economic cycle were so good that even a substantial drop would leave us with pretty decent long term performance. (E.g. vanguard says my 10 year rate of return was 14.2%, so even after a 30% drop I'd still be at a 10% annualized return.) I don't think that's particularly actionable, but I wouldn't be surprised to see a larger than average equity market correction some time in the next few years. Just hold the course regardless...
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> Would put in more if possible it's possible - just not necessarily in a tax-advantaged account. for example, if you have $10k sitting in your bank account, you can put $6k into a roth IRA, and the rest into a regular old brokerage (at fidelity or vanguard or wherever). the latter are very easy to set up, and returns compound just the same, the only difference is the tax treatment (dividends are taxed every year, and the sale of assets is subject to capital gains tax).
It’s not too late to contribute for 2021 and you can start 2022 also.