“…Like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence.”
So, how are companies performing? It depends on which you own but, during the current quarterly earnings season, most companies have reported earnings that exceed expectations. That’s not something that tends to happen during recessions, according to Barron’s.
Setting An Example For Future Generations
Do your children or grandchildren spend summers mowing lawns, repairing computers, or selling movie tickets? Perhaps, they have part-time jobs during the school year, bagging groceries, or working in a local shop. No matter the type of work done, if a young person has earned income, he or she can save in a Roth IRA.
While saving for retirement probably isn’t even a blip on the radar for most young people, their older relatives are aware of the challenges related to saving for and generating income in retirement. Many also understand the importance of starting early – a task that has been made easier by custodial Roth IRAs. It is now possible to establish Roth IRAs for children who are younger than age 18, as long as they have earned income.
Communicating the importance of saving for retirement (and other goals) to younger family members is important, especially when the 2015 Employee Benefit Research Institute’s Retirement Confidence Survey found about 39 percent of working Americans are not currently saving for retirement. Since actions often speak louder than words, a Time.comreporter offered this suggestion:
“Most kids will not have the ability or discipline to fund the account through their earnings. But adults can reward their hard work by contributing on their behalf. This demonstrates the value of saving…The additional saving is all the more important for young people, who will have fewer sources of guaranteed lifetime income in their retirement years.”
Money Chimp’s compounding calculator suggests a one-time $5,000 investment, earning 6 percent a year on average, would be worth more than $178,000 in 60 years. That could become tax-free income for a child or grandchild’s retirement if the investment was in a Roth IRA. Please keep in mind, this is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical 6% return used is not guaranteed and does not reflect the deduction of fees and charges inherent to investing.
Of course, one attractive aspect of a Roth IRA account is the assets also can be used, penalty-free, for college tuition or the purchase of a first home, as long as certain requirements are met (including the account having been open for at least five years). About the Roth IRA – The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.
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