Should I put money into my Roth IRA or begin a Traditional IRA?

 Good evening Dear Reader (or morning as the case may be where you are!),

The Mad FIentist (whom I greatly admire) does an excellent write-up in this post ( https://www.madfientist.com/how-to-access-retirement-funds-early/ ) detailed exactly why you should invest in a Traditional IRA rather than a Roth IRA.

Alas, this post was not written back when I opened my Roth IRA (I would hazard a guess that was in 2005 or 2006), nor was I aware of FIRE back then.

As such, I have constantly been asking myself. Do I continue investing in my Roth IRA or should I begin a Traditional IRA (better late than never, am I right)?

After considering this for about a year, and (finally!) this year I think I am eligible for a Traditional IRA, I sat down and did some simple math using this online calculator: https://www.nerdwallet.com/banking/calculator/compound-interest-calculator .

And, here is a table with the results:

Vehicle	Current Investment	Additional Investment	Growth after 8 years	Growth after 20 years
Roth IRA (TD)	50548.05	0	69611	112492
Trad IRA (Schwab)	0	6000	8263	13353

I note the different brokerages because were I to open a Traditional IRA, I would open it with Schwab as I primarily invest in SWPPX currently. Therefore, the amount in the Roth has $16.95x4 subtracted from the maximum I can contribute in 2021 ($6000). This is assuming I would split the $6000 up into 4 equal payments to invest in the stock market at intervals as regular as I can make them to take advantage of dollar cost averaging. Of course, I might just dump the whole amount in at one time depending on how the stock market is doing at that time.

Well, my inkling that adding $5932.2 to my existing amount in SWPPX would compound in interest resulting in much larger gains than starting from scratch this year proved correct. I would have a whopping $19,000+ increase than if I opened a traditional IRA.

I checked growth after 8 years and after 20 years since it isn't clear yet if we'll retire in 8 or 20 years. As I've mentioned previously, if I retire in 20 years, I'll be able to take advantage of special gap medical insurance for my husband and myself.

These numbers don't include any additional investments past this year (2021) since I wasn't sure how many more years I'd qualify to deposit in the Traditional IRA (another reason why putting the money in the Roth might make more sense).

So as another pair of bloggers I admire say, math'ing shit up works every time (Millennial Revolution! You should check out their blog too, you may enjoy it - if you don't subscribe to them already :) ).

UPDATE: Jan 17, 2021, 8:20 PM EST.

Well, this is embarrassing. I went through the scenario above with a good friend and they explained the growth would be the same no matter what I invested in.

Actually, the money in the traditional grows a little more due to the fact that you aren't paying fees if I open a traditional with Schwab.

See the new calculations below:

Vehicle	Current Investment	Additional Investment	Growth after 8 years	Growth after 20 years
Roth IRA (TD)	50548.05	0	69611	112492
Trad IRA (Schwab)	0	6000	8263	13353
Roth IRA (no additional contributions)	44615.85	0	61440	99289
Sum of Trad IRA + Roth IRA (no additional)	44615.85	6000	69703	112642

So, looks like I'll be opening a traditional in 2021! It would also be good to note that it will be more of a hassle if I do traditional then a Roth conversion ladder, but even if I decide not to do a conversion ladder, per the MadFIentist, you will get more money in the long run even if you decide to do the penalty.

Well. Even the best of us can make mistakes. 

I wish you a very pleasant evening,

Into the FIRE 

Into the FIRE's Millionaire Pledge

Dear, dear Reader,

I'm back! I am taking J$'s Millionaire Pledge.

In order for me, Into the FIRE, to become a millionaire, I pledge to do the following (each year):

Max out my 403(b) - $19,500/year

Max out my Roth (or traditional) IRA - $6,000/year

Using CNN Money's Millionaire Calculator (which can be found here: https://money.cnn.com/tools/millionaire/millionaire.html ), they calculated it would take me 8 years and 3 months until I attain millionaire status.

I also used a conservative estimate of 4% interest per year.

This means I'll be a millionaire when I'm 43. That's exciting, but it would be even more exciting if I was able to reach this before age 40.

Note the calculator also adjusts for inflation, and they said if I include inflation, it will take 14 years and 7 months. Whew! That means I wouldn't be a millionaire until age 49... That just seems like eternity right now!

Once I get accepted with this pledge, and once I reach a millionaire dollars, I'm really looking forward to posting that badge (code)! :)

Ever yours,

Into the FIRE

Compilation of FI and FIRE Bloggers Net Worths’

 

The Net Worths of Personal Finance Bloggers

In order of highest to lowest (foreign currencies converted to U.S. dollars):

1. The Money Commando @ $9,550,029.89 (As of Dec 2021)
2. Financially Alert @ $3,064,012 (As of Dec 31, 2021)
3. Root of Good @ $2,830,000 (As of Dec 31, 2021)
4. Millionaire Before 50 @ $2,699,115 (As of Jan 2022)
5. The FI Explorer @ $2,138,176.13 ($AUD 2,948,635, As of Dec 31, 2021)
6. Road to a Tesla @ $2,006,775 (As of June 2021)
7. Remember to Water @ $1,731,919.37 ($AUD 2,305,000, As of June 2021)
8. My Road to Wealth and Freedom @ $1,283,558.78 ($CDN 1,636,201, As of Jan 4, 2022)
9. Personal Finance News @ $1,196,172 (As of Feb 2018)
10. Few and FIRE Between @ $702,777 (As of Jan 2022 - this is yours truly!)
11. Freedom 35 @ $625,860 ($CDN 837,000, rounded to nearest $1k, As of Dec 27, 2021)
12. DINKS Finance @ $386,606.92 (As of Dec 9, 2021)

This list will continue to be updated as time goes on, and as more people confirm they want to be added. The last time this post was edited was January 18, 2022, 8:51 PM EST.

Please note different blogs have different ways of calculating their respective net worths! We have done our best to be respectful of everyone's wishes. If you have a complaint, please leave a comment below.

Also, if you would like to be included on this list, please leave a comment below with your information and a link to your blog!

Hungryroot Promo Code!!

 Hello Dear Reader,

Happy New Year to you! I hope you all are well. :) Ha ha, look at me, assuming I have one or more readers (lol).

Well, in any case, I have an affiliate code to share with you! I just signed up for a weekly order of Hungryroot. I'm very excited that these will be delicious, healthy, easy to cook meals and fast. 

If you use this link, you'll get $40 off (and I'll get $40 to spend on groceries (through Hungryroot)!).

I'll post a review after the first week of using, but you can pause weeks or cancel at any time :).

Here is the link:

https://www.hungryroot.com/r/JI950GRL

(all capital letters for the referral code)

When you sign up, you go through a quiz of what allergies/diet restrictions you are observing, how much you eat, how many meals you want (all, some, or none). Then it will lead you through what kind of meals you want to eat.

I've heard very good things about this on the internet and I'm very excited! Stay tuned for our review.

Ever yours,

Into the FIRE