Become a Multimillionaire by Fully Funding Your Roth IRA

Retiring as a multimillionaire is possible for the average American if the maximum amount allowed is contributed to his or her Roth IRA annually. Keep reading to learn about how investing in a Roth IRA can help set you up for a comfortable retirement.

Suggested Article: You Can’t Get Rich If You Can’t Wait to Get Rich

What Is a Roth IRA?

A Roth IRA is a retirement account that allows you to save money specifically for your retirement years. You can contribute a maximum of $5,500 annually ($6,500 if you’re 50 or older) to a Roth IRA, per IRS regulations. If you contribute the maximum amount allowed each year, it is possible to reach a couple of million dollars by the time you reach retirement age. Of course, this depends upon how soon you start contributing to your IRA. The sooner you start saving, the more you’ll end up with down the line. You can calculate how much you will have saved by retirement based on your age and the amount you save by using the David Ramsey Investment Calculator.

What a Roth IRA Will Look Like at Age 70

For easy math, let’s say you didn’t start putting money into your Roth IRA until age 18 (suggested article: How old do you have to be to start investing?). Let’s assume an 8% annual return, which is very reasonable given that the benchmark S&P 500 has gained nearly 12% since inception. The max annual contribution is $5,500. The money grows tax-free. You could simply place your Roth IRA money in a lazy portfolio following the example of our CEO.

By following these steps, you would have $3,987,645.24 by age 70. Even with inflation, that could possibly be enough to retire on. All from simply tucking away $5,500 per year — that’s not a lot of money.

It’s important to note the restrictions that come with having a Roth IRA. The “phase-out” period for an individual contributing to a Roth IRA is a yearly salary of $116,000 to $131,000. If you make this amount of money, you may still be able to contribute, but you’ll need to get creative. The following articles are helpful if you find yourself in this situation:

In Summary

Regardless of age, all Americans should spend some time thinking about and investing in their retirement years. With little effort, you can put away enough money annually into a Roth IRA to retire as a millionaire. If you can’t afford to invest the max contribution of $5,500 annually, you can look into ways to make money on the side, including jobs you can do from home.

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  • Jimmy Barrios says:

    If I am only 16 years old with a summer job that pays 400$ every two weeks for six weeks, can I still fund my Roth IRA and possible make a decent amount of money?

    • William Lipovsky says:
      First Quarter Finance logostaff

      Hey Jimmy,

      Yes, you can invest in a Roth IRA at your age and with that income. There’s no minimum income required (just a maximum). Make sure though that you can prove you earned the money. This is as simple as paying taxes as you normally would. And you can make good money with $1,200 invested. You’ll probably make about $100 your first year if you invest in an index mutual fund or ETF and sit in a hammock all year. Investing is pretty sweet. The money will compound over time and turn into a very respectable sum. But what’s more important than how you invest is investing a lot of money to begin with. Make sure you’re continually earning more money as you grow older. Finally, since you’re the under age of majority, your parents will need to sign for your Roth IRA. You’ll need to open a custodial account. It’s not too tricky but you can read more about the process here:

      Let me know if you have any other questions!

  • Financial Samurai says:

    Good luck! But before you contribute another dollar, please read my anti-Roth IRA post in the URL above. It is the #1 anti-Roth IRA article searched online and there are like hundreds of comments that will make you think.

    Roth is better than nothing, but are you maxing out your 401k first?

    • William Lipovsky says:
      First Quarter Finance logostaff


      Yep, Roth is maxed at Vanguard at 50%. I’ll head over and reach your article. Thanks for challenging me!

  • I never really thought about investing in the Roth IRA like that, I always thought I should focus on maxing out my 401(k) first (which, since it has a higher limit, is a lot harder!) Maxing out the Roth seems like a good idea, plus it’s something I could actually do annually, which would make me feel good too! Hey!

    • William Lipovsky says:
      First Quarter Finance logostaff

      Is your 401(k) a Roth 401(k) by chance? Those are pretty swell.

      Maybe you can earn another $5500 this year and max out both the IRA and the 401(k)!

  • Well done!

    The Roth IRA is great when you are just starting out, or when income is low and you have close to zero tax liability. I wish I had contributed to a Roth when I was 10. That will give you a sweet foundation later

    I wouldn’t sweat the phase out at higher incomes. I think the Roth is overrated at higher income levels, and a Traditional 401k and IRA are the way to go.

    That’s what we did, and retired in our 30’s and pay zero tax on investment income of over $90k/year. I have to agree, America is pretty great

    • You two retired in your 30’s making $90K+ per year with zero taxes? I think I may be spending the rest of my day on your blog. 🙂

      Well done!

        • Thanks Will!

          Since you starting investing at 10, you’ll blow right past us. Compound interest is a powerful force

        • Will, have you ever considered moving some of the contributions you are making to your Roth IRA to an HSA, IRA, etc instead? I’ve been reading Jeremy’s blog a ton lately, and am intrigued by his strong recommendation to use tax-deferred accounts as much as possible. I’m curious if you have read his suggestions, too, and what your thoughts are.

      • Haha, thanks Paul

        Yeah, that’s what appears on our tax forms anyway. I published last year’s 1040 so people can see how we did it. I’ll do the same with this year’s 1040, and plan to do our Schedule D as well

        The US Tax Code is really friendly to early retirees



  • Another benefit to a Roth IRA is that contributions (which are not the same as earnings) can be withdrawn penalty and tax-free at any time. I’m not saying a Roth IRA should be treated as an emergency fund, but being able to withdraw your contributions if needed is a sweet perk if something unexpected happens.

    • William Lipovsky says:
      First Quarter Finance logostaff

      I know, right?! I thought about buying a house with my principal. But then again, I’ll never have the opportunity to makeup for what I took out. I probably won’t do it but I should research it further. Do you think it’s wise?

      • Paul Bures says:

        I think that Roth IRA contributions should only be used in a situation in which they can generate a higher return outside the Roth than inside of it. In the situation you mentioned, I would only do it if the housing prices are low, stock prices are high, and have an opportunity to buy a house outright (i.e. you can avoid paying mortgage interest, etc). I think it’s nice to not have a rent / mortgage payment, but things like property taxes (incredibly high here in parts of Omaha / La Vista) and maintenance can still make renting a better option than buying. I guess that’s my long way of saying “it depends.” 🙂

      • William Lipovsky says:
        First Quarter Finance logostaff

        I know! It’s such a terrible investment. I think people just say it’s a good investment in an attempt to rationalize their giant house. Fantastic link, btw! I was laughing and crying all at the same time. Laughing because I haven’t bought a house but crying because my sister has!

        It should be something that locks its owner in one geographical area. That’ll limit their options and keep ‘em docile for their employers!

        So true.

  • This sounds like the TFSA here in Canada (no income phase out though). I love compound interest!

  • Great post and links. Awesome that the limits are based on MAGI versus Gross… we worked tons of paid overtime last year and working just a few hours less would have been all the difference. Something we’ll want to keep in mind moving forward!