Fully fund a Roth IRA every year, build a diverse portfolio, and you can become a millionaire in time for retirement. As long as you start early enough.

I have been having conversations about money for a few decades now. One subject that comes up over and over is the “fact” that it is impossible to get ahead in this country. The argument often goes: “wealth inequality is so bad that the rich keep getting richer and the poor keep getting poorer.”

Parts of that are true: wealth inequality is not only increasing, but accelerating in the US. However, that does not mean that it is impossible to get ahead.

It is true that people who already have wealth are accumulating more wealth. I don’t have any answers for that. Maybe it’s bad. Maybe it’s good. Maybe the government should do something about it. Maybe not.

The point is that it doesn’t matter for you. What matters for you, today, is that if you want to become wealthy, you have to work at it.

Becoming wealthy is hard. But, hard is not the same thing as impossible.

It turns out, the US government has created a tool that will make you a millionaire. It’s called the Roth IRA.

Becoming A Millionaire is Hard. Not Impossible.

In 2018, the folks at Dave Ramsey Solutions did a huge research project where they interviewed over 10,000 millionaires in the US. They found that about 80% of the current millionaires in the US inherited $0. Another 10% inherited a small amount, not enough to significantly push them toward millionaire status.

That means that about 90% of the current US millionaires are self-made.

That’s an incredible statistic. We live in incredible times. In fact, I would bet that never in the history of humankind has such a large proportion of wealthy people been first-generation money.

Sure, it is pretty much impossible to become as wealthy as Bezos, Gates, Buffett, or Zuckerberg. But, if you want to become a millionaire, you can. The government has given you a tool that will make it happen.

No Such Thing as Get Rich Quick

Before we jump into the Roth IRA, we need to have a quick side-bar.

Overnight Success is a Myth

It is easy to look at Bezos, Gates, Buffett, and Zuckerberg and focus on the money they have now. But, let’s not forget that they did not “get rich quick.” They all worked for years before making it big. Bezos & Zuckerberg have been on the verge of bankruptcy for most of their professional careers, only recently turning a profit. Buffett & Gates have worked for decades building their empires.

Even though they are massive success stories, it is important to remember that success like that does not come without lots of hard work. Building wealth is a marathon, not a sprint.

I would be willing to bet that the chance of success for pretty much any get-rich-quick scheme rounds to 0%.

So, when you are looking for a way to better your financial situation, make sure that whatever you pick is sustainable for the long-haul.

Before You Open a Roth IRA

This is an important part of the Roth IRA discussion. The only way for the Roth IRA to work as a tool to make you wealthy is if you leave your money in there for a long time.

Therefore, before you open a Roth IRA you need to have your finances in order. You need to escape the paycheck-to-paycheck cycle. You need to live below your means. And, you need an emergency fund.

If you start funding a Roth IRA before you have those things, then any little hiccup or pothole you hit along the way will derail your plans. If you have to raid your retirement account for kids’ braces, a new furnace, or a down payment on a house, then you aren’t actually making any progress.

So, please don’t just skip to the end. Do the hard work.

Take a look at the Undetailed Budget to learn how to live within your means.

Learn about the “How Much Do I Qualify For” trap. If you are spending 50% of your gross income on housing and transportation, start making steps today to bring it down.

Use a Roth IRA to Get Rich Slowly

Okay, now we can jump into one of my favorite financial tools: the Roth IRA.

A Roth IRA is simply a tax shelter. There is no special tax treatment when you put money into a Roth IRA. It is taxed just like the rest of your income.

But, after you put your money inside a Roth IRA, something miraculous happens: it is allowed to grow. And, if you follow the rules, you will never pay any taxes on that growth. Ever.

Let’s look at a few examples, just to see how amazing this Roth IRA really is.

Currently, most single people under the age of 50 in the US are allowed to contribute up to $6,000 per year into a Roth IRA. Once inside the Roth, you can do pretty much whatever you want to with the money… except spend it.

Let’s say you used the money to buy a fairly standard, diversified portfolio with a mix of stock and bond index funds. (Find out more about my approach to investing in my article How to Use Diversification to Profit from All Market Conditions). A fairly reasonable rate of return on a portfolio like that would be about 8% per year, over a long period of time.

If you put $6,000 per year into a Roth IRA starting at age 30, you will have about $1.2 million by age 65. The best part: you will have only contributed $216,000. The other $1 million is all growth that will never, ever be taxed.

If you start a bit earlier, at age 25, you will have only put in an additional $30,000, but at the end you will have over $1.5 million! That’s an extra $300,000 of tax free money!

Start a Roth IRA Now, Even it it is “Too Late”

An objection I hear to this all the time is that it is too late. Most people don’t start investing at age 25 or even 30. So, they’ve missed out. There’s no reason to invest.

That’s ridiculous.

Let me rephrase the statement, and you’ll see just how ridiculous it is. Here’s what I hear when someone makes that argument:

“I regret not saving when I was young. That was dumb. But, I’m not going to save now, because, I guess, future me deserves the same disappointment as I have now.”

Ew. No.

Make future you happy. Save some money and give it to future you.

If you put $6k into the Roth every year from 35 to 65, you’ll have about $800k.

If you start at 40, you’ll have $500k.

If you start at 45, you’ll have over $300k.

And, all of those numbers assume that you stick to $6k per year.

But wait, there’s more! The government realizes that most people have trouble saving while they’re young. For almost everyone, their highest earning years are later in their career. That’s why the government allows you to boost your contributions when you reach 50. Right now, that boost is an additional $1,000 per year. So, most people over 50 can contribute $7,000 per year.

Married? Even Better!

If you are married you can double all of these numbers. A married couple under 50 can contribute $6,000 to a Roth IRA for each spouse, for a total of $12k. Then, after 50 each spouse can do $7k, for a total of $14k.

To see just how powerful the Roth IRA is, let’s look at what they’re capable of. If a married couple contributes the maximum to their Roth IRA, starting at age 30, all the way through until they’re 65, they’ll have a pile of money.

They will have contributed $12k per year for 20 years, and then $14k for another 15 years. That is a total of $450,000 of their own money they have set aside. But, that money will have grown to $2.3 million! That’s $1,850,000 of tax free money that they didn’t even have to work for!

What would you be willing to give up for $1,850,000 of tax free money that you don’t even have to work for?

Take a look around your house. See all of the things you bought this year. Go back through your credit card statements and see how much you have paid restaurants in the last 12 months to cook for you and do your dishes.

As always, this is a judgement-free zone. I want you to spend your money however you want. It is totally up to you.

But, if you don’t feel like you have made as much financial progress as you would like, and you don’t know where all your money goes, then I would just remind you that by not fully funding your Roth IRA you are walking away from $1,850,000 of tax free money that you don’t even have to punch a clock to get.

Nobody Can Afford a Roth

“I can’t afford $12,000 per year. That’s $1,000 a month!”

I have heard that a million times. I have heard it so much that sometimes it starts to sound true.

For perspective, I like to look at an average household in the US. If they can do it, so can you.

In the US, the median Household income is approximately $60k.

When you buy houses and cars, you often ask the bank, “how much do I qualify for.” If you’re persistent, you may be able to qualify for housing and transportation payments that add up to 50% of your income, or about $30k per year for the median US household.

But, if you are more cautious and limit yourself to the 2 financial rules of thumb, then you won’t allow housing and transportation to grow beyond 25% of your income. That brings your housing and transportation costs down from $30k to $15k per year. You can put $12k of that into a Roth and do whatever you want with the extra $3k!

That means that your expensive car and house are costing you more than just the payments. By borrowing the maximum for your car and house, you are walking away from a nest egg worth millions.

A married couple who fully funds their Roth IRA every year, starting at age 30, will have approximately $1,850,000 of growth in their account by age 65. And, they’ll still have the $450k they put in there, for a total nest egg of $2,300,000!

That’s a really expensive house and fancy car.

Final Thoughts

Personal finance is hard. If becoming wealthy was easy, everyone would do it.

I know it is discouraging to see the wealth gap growing around the world. It is disheartening and feels unfair. And, maybe something can be done about it.

But, in the mean time, don’t let other peoples’ situations dictate your own. Take control of your finances. There are only four things you need to do to win with money:

  • Spend less than you make.
  • Have emergency savings.
  • Have diverse investments.
  • Rebalance regularly.

The fact that wealthy people exist (and you aren’t one of them) doesn’t impact that list.

The first step is to make sure you know where your money is going. If your discretionary spending is more than you want it to be, find ways to cut back. If your housing and transportation costs are approaching 50% of your income, start making steps today to bring those down.

Spending your whole income without saving costs a lot more than just your income. It keeps you from letting your money grow. Plus, by not having a Roth IRA, you are missing out on tax-free growth!


Not everyone is eligible for a Roth IRA. There are income limitations.

As always, this is general financial advice. For personalized financial and tax advice about whether a Roth is available and/or appropriate for your specific situation, please consult a tax professional.

I hope this has been helpful! I welcome your comments with your thoughts and questions. And, don’t forget to subscribe to the newsletter to get notified whenever a new article is posted.

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