Hip-hip hooray! My Roth IRA hit a quarter million! It feels like such a substantial number. Sharing a deep dive of the values over the 14 years it took to get here, with a hefty dose of commentary.
To preface, I've reconstructed what I can based on a giant stack of paper, but I am sad to say I don't have proper valuations for all the years. The money has moved accounts as I've moved jobs, my spreadsheets were spread across multiple computers and I didn't carry forward data.
Disclaimer on Privilege // I know, I know, but I bring it up often because it's true. Privilege plays a part. I would be remiss not to mention the privilege I had of covered expenses growing up, my scholarship for schooling, and a safe home with parents who let me stick around.
Contributions
* In most cases, the Roth IRA contribution was made before Tax Day (April) of the following year.
** At this point, I switched my 401k contributions to pre-tax dollars.
*** At this point, I changed employers and started earning six figures. I rolled over my entire Roth 401k ($45k) into the Roth IRA.
Commentary
2008: Tutoring earned cash under-the-table, enough to pay for gas and some miscellaneous needs, but it was a school-year job. My stepdad wasn't keen on me sitting around the house for the summer. To appease him, I applied at Kroger (our local grocery store) hoping they wouldn't call. Fortunately or unfortunately, they called wanting to interview me, leaving a message on our voicemail that my stepdad listened to first. Yay for late nights bagging and pushing carts! I only made $6.29/hour (85% of Michigan's minimum wage, allowable for those under 18). $2,057 / $6.29 = 327 hours during ~70 shifts, and the thought of all that life energy now makes me want to sob hysterically. And the money went into my savings account, since I thought I'd need it for school. If I could time travel, I'd put it in the Roth IRA. Especially since I could have pulled the principal back out if I needed it.
2009: As soon as I turned 18, I started earning $7.45/hour (A little less depressing...) at the store. I graduated high school and spent my summer working weekends at the store and weekdays at Subway (a sandwich shop). Then I started waitressing (weekends only) when I started my college courses, which were paid for by a full academic scholarship. This year was THE year to start investing, because almost everything went up up up. But you know who didn't invest in a Roth IRA? Still me. It wasn't until...
2010: I made a contribution for $5k for the prior tax year. Good job, past me! We all have to start somewhere. My effective tax rate was 0%, which is exactly when you want to be investing in a Roth.
I continued waitressing during the weekends, but I quit at the end of the summer. My low income meant I had to file my taxes before I knew what I could contribute, due to the laws for IRAs.
2011-2012: I contributed dollars for the prior year, based on earned income. My effective tax rate was still a lovely 0%. During the school year, I worked as a TA for one of our professors, grading papers and holding office hours. After graduating and completing an unpaid internship, I started my "big girl job" in November 2012.
January 2013: I received a small inheritance from my grandparents, which I used to contribute to my Roth IRA for the 2012 and 2013 calendar years. (I was only able to do this because I had the earned income.) Windfalls should go toward financial independence, not lifestyle inflation.
2013-2014: Most of my cash went to purchasing my first house. Despite continuing renovations with cash, I still stashed away money. It wasn't easy, and my budget was tight, but automation was my friend. My whole bonus went into investments. I also took advantage of any and all overtime offered by my employer.
2015: What a year... renovations continued, but I had more flexibility to ramp up savings in my 401k. I bought a puppy during the summer, who brought happy new expenses with her. And I moved down to Florida at Christmas.
2016-2017: In February 2016, I took a 401k loan (~$15k) so I could purchase my second house. At first, the budget was very tight. Once I started renting out the main portion of it through AirBNB, I was able to save a ton between my 401k loan repayment, contributions to my Roth 401k and my Roth IRA, and the principal on the mortgage. In September 2017, I paid off my 401k loan in full. Thanks to real estate deductions and an excellent CPA, my effective tax rate was tiny, so I continued utilizing the Roth accounts.
2018: After getting married (no more real estate deductions) and switching jobs (which came with more money---but also a higher marginal tax rate), it didn't make sense to contribute to a Roth 401k anymore. However, for the benefit of tax diversification in retirement, I did continue to contribute to the Roth IRA.
2020 onward: The account was busy growing almost entirely on its own.
On the whole, my contributions were messy. Some years, they didn't happen, or I wasn't able to take full advantage of the tax-advantaged space. But past me still did the thing. Good is better than perfect. Progress is progress.
Today: We've hit $250k in the account, despite only contributing $112k. That's an increase of over 100%. Yes, it took 14 years. Some years were up, and some years were down. But when it comes down to it, time in the market beats timing the market.
Future
This money is earmarked for the looooooong term. If I invest nothing more and assume an 8% return, the account will hit $500k by 2033. $1MM by 2042. $2MM by 2051, when I turn 60 and am able to withdraw the entire amount completely tax-free. That is a huge amount of flexibility for later, and a huge relief for now.
This is the power of compounding. This is the power of making dollars work for you.