Category Archives: Roth IRA

My Roth IRA Has An Annual Growth Rate of 52.75 % Since Inception!

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Move over Mr. Buffett, there is a new bull in town (don’t I wish)!

According to my Broker, my Roth IRA has average a 52.75% return since inception!  I’m an investing GOD, not.

Please note the following statistics provided by my online Charles Schwab account, and read the real deal below:

RothIRAPerformanceSM

 

It really does make me look like an investing God, but unfortunately the Inception Date is not quite old enough.  Apparently the Inception Date is when my broker started keeping records because I had the account much earlier than the year 2009…

Back around 2003, I started my online Roth IRA with my broker, and I did very well.  In fact, I doubled my balance in less than 5 years.  Unfortunately, I was in some risky stock and I actually loss money and ended the 5 year with less than I put in originally (just by a little bit though).

Devastated, but still excited by the incredible stock market ride, I decided to alter my strategy to a two stage approach:

1.) Invest in a solid dividend stock that would not decrease in value (this was for my emergency fund aspect of the Roth IRA).

2.) Invest in something that I thought would do well in the market, but wasn’t a sure thing.  So I invested in a speculative stock (BAIDU).  I was actually pretty sure this was a good choice, but with speculative stocks one never knows.

Well, my dividend stock did fine, but BAIDU (ticker bidu) went nuts over the next few years.  It’s been my biggest win ever in fact!

So while my numbers look impressive above, practically all of my big gain was betting on the BAIDU racehorse of a stock to make me the big gains.  I’m no longer own BAIDU in my Roth IRA, but the was a fun ride while it lasted.

If I doubled my income in 7 years, that’s only around a 10.2% return, but I sure wish it was 52.75% since inception.  If that were the case, I’d be bragging like there was no tomorrow 🙂

Statistics are funny sometimes, I just wanted to show how interesting they can really be.  Oh, and so far this year I’m off to a great start!  10.12% in the first month, not too shabby!

Have fun this year, the market should be another wild ride!

Don

Use ESPP Money To Fund My Roth IRA

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After re-reading my article called “Roth IRA Unusual Benefits“, I decided to start focusing on contributing to my Roth IRA again because the benefits are just too incredible!

It’s been a hard path for me because I’ve been participating in my employer’s ESPP (read “Getting Over 15% Return By Saving Money In An ESPP“).  So in the ESPP, I have been contributing 10% of my salary into it so that I could get the instant 15% discount on the purchase price that the program offers every quarter!  I then sell the company stock I buy with the ESPP.  It has been a great way to make a cool, extra 15% on 10% of my salary a year!

Cash in Hand

But now I think I want to take that extra money that I gain from participating in the ESPP and use my ESPP money to fund my Roth IRA.  The ESPP money would include both my contributions and earning from the plan.

Using my ESPP to fund my Roth IRA will make the ESPP a friendly, but (almost) forced saving program for funding my Roth IRA.  In fact, the ESPP is a perfect instrument for this, and I regret not thinking of it earlier!

Why is ESPP such a great instrument to fund a Roth IRA?

  1. Once I sell the shares in the ESPP, all of what I sold is taxable.  So since it’s already taxed why not use it to fund my Roth?
  2. It’s a painless way to save the money up slowly throughout the year.  The idea is to contribute at least $1,000 per quarter directly into the Roth IRA as the amounts become available.
  3. Most of the ESPP money would go into investments anyway, so why not buy investments in a Roth that won’t be taxed EVER again?
  4. Knowing that the ESPP is special money that is to be used to fund my Roth IRA, makes it easier to use for the Roth IRA.  This is a mental trick of course, but it works.

So now you know my future plans for the money I save and gain in an ESPP.  Do you use any special money trick or tips to fund your Roth IRA?

My ESPP planning keeps getting better and better the more I think about it!

Don

Is A Roth IRA One Of The Best Protection Against High Future Tax Rates?

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Roth IRA Tax Protection!

If taxes are going to raise and especially on dividends from stocks, is the venerable Roth IRA the only protection that we as middle income/class folks have against getting gouged by the (T)ax man?

What if you are relying on a dividend or some other type of income stream in the future, and all of a sudden you retire and instantly the tax rates double?  Or maybe the tax rates rise slowly over time to a point where you can never really live on a money steam without the fear of running out of money before you die, so you work forever?

Is that really any way to live?  I dread having to worry about my money so much, isn’t there enough in live to worry about already?

But even if they tax rates jump to a ludicrous combined total percentage (let’s pretend 90% for everybody), in a Roth IRA, you are for the most part safe against taxes!  You are safe because even if the tax rate increase to such an unbelievably high level, when you pull your money out of your Roth IRA, its tax-free!  And that makes all the difference when it comes to retiring comfortably and living with less stress!

Actually, in the finance world, a Roth IRA is some what of a superhero versus the run of the mill retirement instructions out in the market place.  The extra benefits of owning a Roth IRA makes it a financial instrument that everybody should consider!  Read my previous articles why I consider the Roth IRA to be such a superior product in my previous article titled: Roth IRA Unusual Benefits.

With the debt and overspending happening in the United States, it’s inedible that eventually taxes will get raised, and perhaps to a very high rate to boot.  So while you might not sole reply on a Roth IRA for your future, perhaps it would be a wise choice to diversify your retirement paths and start or if you already have one, channel more of your hard-earned money into such a superb financial device?

Bests,

Don