OP-ED: Let's FIRE Up Our Roth IRAs

By: Tyler Williams

(Source: UnSplash / Omar Anukrati)


If there is one thing that both millennials and Gen-Zers agree on is, in order to live financially free, multiple streams of income must be present. Relying on a 9 to 5 job is not the best financial decision to make in this climate. Now, putting an index fund like the S&P 500 in a Roth IRA is one of the best investments that one can do for their finances.


Let’s face it, Social Security will be long gone by the time we hit our 60s; or will it? Social Security is experiencing funding issues and the retirement age keeps increasing, but there are reasons for this.

According to AARP, one of the myths about Social Security that refuses to die is Social Security is going broke.

“For decades it collected more than it paid out, building a surplus that stood at $2.9 trillion at the end of 2020. But the system is starting to pay out more than it takes in, largely because the retiree population is growing faster than the working population, and living longer. Without changes in how Social Security is financed, the surplus is projected to run out in 2034”, says AARP.

The retirement age keeps increasing as well. The current age for the full retirement age (FRA) is 66 years old and 2 months. AARP wrote that over the next five years, the FRA will increase by two months at a time, settling at 67 for those born in 1960 and after. That’s a long time to reap the benefits for the hard labor and sweat over the years. Why even wait that long? There are two strategies that people can expedite the retirement process and go on vacation to the Bahamas or Dubai sooner than one thinks.


(Source: Instagram - @personalfinanceclub)


What if there was a way someone can consistently deposit a certain amount of money like $100 a month and watch it grow overtime, thanks to compound interest? Guess what, there is a way and the way is to invest in a Roth Individual Retirement Account (IRA). A Roth IRA is an individual retirement account with a lot of perks when it comes to taxes and reduced fees. According to Investopedia, contributions are not tax-deductible and qualified distributions are tax-free; which means that one can withdraw their contributions at any time and they will not be taxed.


But wait, there’s more. It’s not enough to have a Roth IRA, exchange-traded funds (ETFs) and index funds must be included inside of the retirement account. Investopedia reports that ETFs are a great way to build a solid portfolio because they have lower fees than traditional mutual funds and offer both broad diversification and access to very specific sectors in the market.


CNN reports that Financial Independence Retire Early -- or FIRE -- is a method of living below your means to obtain financial independence and security as early as possible. “FIRE is based on the notion that retirement is determined by a financial number and not by a person's age. It focuses on keeping expenses low and savings high. That means usually saving anywhere between 50% to 75% of your annual income to retire well before the age of 65 and usually without any debt.” The article also states that starting as early as possible comes with many advantages. After all, getting a head start on your savings and investments gives your money ample time to compound. However, even though retiring early requires various sacrifices when it comes to saving and spending, the perks can be rewarding.


Some, if not, most of the financial strategies that were taken by the previous generations are inefficient when it comes to building wealth. Back in the day when our parents were young adults, a mortgage costs a quarter a month. Well, that’s an exaggeration. In fact, CNBC reported that houses weren’t always this expensive. “In 1940, the median home value in the U.S. was just $2,938. In 1980, it was $47,200, and by 2000, it had risen to $119,600. Even adjusted for inflation, the median home price in 1940 would only have been $30,600 in 2000 dollars, according to data from the U.S. Census.”


All in all, why tread a path that is outdated and inefficient while one can research new ways of retiring on their own time? Who says that young adults have to wait until 66 years old to retire? Personally, I am trying to retire at 40 years old, 45 at the latest. If you can reach your dreams at your own speed and ability, don’t let anyone limit you because your only limit is yourself.


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