Happy (Future) You

1/21/2024

Version 1 - Put $6,500 (2023 limit) into a Roth IRA before April 15th or you’re an idiot!  Then put $7,000 (2024 limit) into a Roth IRA ASAP or you’re an even bigger idiot! Once complete, come back for the next step.

Version 2 - Go to www.schwab.com and open a Roth IRA account immediately.  Put all the money you have or will get before April 15th 2024 into this account until you hit $6,500 and then keep putting any money you encounter into the account designated for 2024 until that hits $7,000 and do this before April 15th 2025.  Don’t be an idiot.  When the money is being deposited, invest the money in the account into a fund called “VOO”.

Version 3 - Go online and search for a highly rated firm that manages Roth IRA accounts and open one soon.  As you come into ANY money (sidewalk, couch cushions, jacket pocket, babysitting, mowing lawns, washing cars, walking dogs, tutoring, dog sitting/walking, working at a job, any way, anywhere), deposit it into this account (up to the current year’s maximum - for this purpose this tax year (2023) doesn’t end until April 15th 2024.  The maximum amount allowed for deposit per tax year typically increases every few years - currently for 2023 it is $6,500).  You can contribute to the Roth IRA account all year and even up to April 15th of the following year (or whatever the deadline date is to file Federal taxes that year).   If you reach the maximum allowable amount for 2023 ($6,500) prior to April 15th, 2024 or if April 15th rolls around before you hit that threshold, then from then on, begin putting all money into the account but designating those deposits as 2024 contributions (the 2024 maximum is $7,000 - yeehaw!)  For 2024, you could have started contributing on January 1st and you can continue until April 15th, 2025, so hurry up, you are already behind!  Since you are new to all of this, you should probably stick to investing in something simple like a fund that tracks the S&P 500 index, such as VOO, but do some research and see for yourself.  As you become more experienced and sophisticated you will learn more and your investment needs and choices may change.  Ideally you would put as much in as soon as you can, in order to take advantage of market growth, but as long as you max it out each year, even if you have to do it on the final day (April 15th 2025), do it!  The maximum allowable contributions are the dollar limits I have indicated or your total “earned income” whichever is lower, so if you come into the cash from selling your stuff online or actually took money from student loans, had gifts from family or friends, found some cash, however you came into it…as long as you file a tax return (consult Dad for tax training) and show that you had income (wink wink, nod, nod) you can put up to that amount into your Roth IRA account as long as you show this “earned” money on your taxes.  You are single and if you file a tax return that includes some (or all) money that didn’t come from a regular employer paycheck, you will be considered “self employed” so you will use whatever amount of cash you actually put into the Roth IRA as your income from all of the “cash” / “odd” jobs.  Just make sure that your “jobs” didn’t cause you to earn more than the amount that will be wiped out by the tax return - single filer “standard deduction” (currently $14,600/yr in 2024) or you will end up paying taxes on that (ahem) “earned income”.  Now, don’t get me wrong, if you are making bank on employer-provided income or your side gig(s)/hustle(s), then don’t stop “earning” or try to limit yourself to the arbitrary standard deduction threshold indicated above as those problems are even better to have.  The advice about not going over the $14,600 (for 2024) is if you are scrounging to identify “earned income” for this purpose.  If you are NOT smelling what Dad is cooking here, please ask.  If your income / tax situation is more complex:  under 18 years old, non-need based scholarships, dividend income, interest income, trust income, royalties, farm income, capital gains, profit from sale of real estate, digital currency, partnership, S Corp, LLC, employer 401k offered, etc., you may need more Dad consultation as there are many other factors to consider and ways to maximize the benefits and minimize the impacts.  Some of the words here will be discussed / defined in other areas at other times so don’t get hung up on them.  The net of this is, go create an account and start putting money into it ASAP!  You can figure the rest of it out later.  Future you will be happy that you did what Dad told you to do because you won’t be poor when you are old.  Future you will thank the current me, but I won’t be here to accept it, so just do what I say now, and that will be thanks enough (I guess?!?).  Future you is welcome!

Version 4 - See version 1.  Stop being an idiot…

Love Dad!   (yes, the comma was purposely omitted)

P.S. for anyone who hasn’t learned by now that when Dad says something, he knows what he is talking about, there’s some stuff below to read while still in this period of your procrastinating idiocy…  ;-)

Version by ChatGPT - 

What's a Roth IRA, You Ask?

Imagine a magical piggy bank where your money grows, tax-free, just by sitting there. That's a Roth IRA for you. It's a type of retirement account - yes, I said the 'R' word - where you can put part of your summer earnings. The coolest part? In the future, when you're as old and wise as your Dad, you can withdraw the money tax-free. Yep, no taxman taking a slice of your pie.

"But I'm Young, Why Think About Retirement?"

I hear you! Retirement seems as far away as another galaxy. But here's a Dad truth bomb: the earlier you start saving, the more your money grows. It's like planting a tiny seed today and watching it grow into a giant money tree. Trust me, your future self, lounging on a beach sipping a fancy drink, will thank you.

How Much Can You Contribute?

For 2024, you can contribute up to $7,000 or your total earned income for the year, whichever is less. Mowing lawns, babysitting, flipping burgers – every penny counts. Think of it as a challenge, like beating the high score in your favorite video game.

The Magic of Compound Interest

Let's talk about the real hero of this story: compound interest. It's like your money making more money just by hanging out together. The longer your money sits in a Roth IRA, the more it grows, thanks to compound interest. It's like a snowball rolling down a hill, getting bigger and bigger.

But What About Spending Money?

Of course, you've worked hard, and you deserve to enjoy some of your earnings now. That's totally cool. The trick is balance. Think of it as a pizza – you can have a few slices now, but save a few for later too. Maybe set a goal to save half of your summer earnings. That way, you can still have fun today while building a mountain of cash for tomorrow. all of your money.  (Dad edited this AI’s wimpy soft approach)

How to Get Started

Talk to your Dad about setting up a Roth IRA. He'll help you navigate the paperwork and choose where to open your account. There are plenty of options, from banks to online investment platforms.

Remember, You're Planting a Seed for Your Future

Starting a Roth IRA as a young person is like getting a head start in the race of life. It's not just about saving money; it's about developing smart habits that will serve you well for years to come.

So, as you dive into your summer job, remember this Dad advice: plowing some of your hard-earned cash into a Roth IRA isn't just smart; it's setting you up for a future as bright as the summer sun. Your future self will be lounging on that beach, thanking you for making such a wise choice when you were just a teenager. Happy saving, kids!