I want to give my little brother his very own IRA retirement account as a college graduation present. Just what every new grad needs!
He just started a new job and is working on creating a budget that fits his $513 a week salary. One of his main goals is to get his car on the road, but I’m gently trying to persuade him to buy a monthly bus pass and contribute to an IRA retirement account. This may well be his quickest way to become a millionaire. (In case you wondered, he said my post about his new budget was “legit.”)
I waited far too long to establish an IRA (mid-20s) and regret I did not begin contributing as early as possible. In fact, I don’t know of any age minimum to start an IRA. Why not establish one with your first job?
IRAs are valuable for their tax advantages. The money you contribute to a traditional IRA is pre-tax; ROTH IRA contributions are post-tax but never taxed again. (More on the difference between traditional and ROTH IRAs.) The longer your IRA money has to grow, the bigger it gets. Just like a seed. Plant it too late, and it will never reach it’s full potential.
I had hoped to put $100 into my little brother’s IRA but as it turns out Charles Schwab requires a $1,000 minimum deposit and Fidelity requires $2,500 to start. These requirements can be waived if you set up a monthly automatic deposit, but I do not have the power to do that for him.
Instead, I’m going to offer him the first $100, which I’ll give him once he sets up an auto-deposit IRA. (Fidelity requires $200 a month auto-deposit; Schwab’s minimum monthly deposit is $100. Both firms have links from their homepage to open an IRA).
For more info on setting up an IRA, including how to invest your IRA, read Wealth Pilgrim’s post on avoiding IRA pitfalls. He knows his stuff!