Financial tip of the day.com - FREEDOM THROUGH FINANCE
Social Sites
  • Financial Tip Of The Day
  • Books
  • Websites
  • Contact Us
  • Disclosure

Can $5,000 really grow to $196 million in 6 years?

20/11/2014

0 Comments

 
Editor: Crass Cash
Picture
http://blogs.wsj.com/totalreturn/2014/11/19/how-a-5000-ira-can-grow-to-196-million-in-six-years-gao/


This article appeared in the WSJ yesterday, but it's really misleading to the average American.  First of all it can't happen to us.  Here's the crux of how it happens...

"In the first example, an entrepreneur contributed $5,000 of “founders’ shares” in a business to a Roth IRA in 2008. The original value of the shares was $0.00125 each. The company went public in 2012 at $25 a share. The account grew to $196 million by 2014."  


This is similar to how Mitt Romney was able to build such a substantial IRA account.  His children also have pretty large accounts, but it has to do with gifting them the tax free minimum of $14,000 since the day they were born.  None of which is even remotely illegal or unethical.  It just come from knowing the tax code.  

That type of situation is not open to most of us.  It's more like hitting the lottery for something like that to happen to anybody.  With that said there's no reason why somebody who doesn't start young enough can't build a very nice nest egg.

If you're 25 now and you want to retire at 65 like most people than $1,900,000 tax free dollars. This assumes that you put away the maximum of $5,500 each year and that you make a non-inflation adjusted return of 9.2%.  Not too shabby!

If you're expecting to do better than this, than you're either smoking crack or you're Warren Buffett.  It's not impossible, I just wouldn't bet my life on it.    
0 Comments



Leave a Reply.

    Author

    This website was created due to the atrociously misguided financial advice that I've heard over the decades.  Financial freedom is not intellectually strenuous, but it takes discipline. 

    RSS Feed

    Categories

    All
    BHAG UPDATE
    College Savings
    College Savings
    Credit
    Economics
    Estate Planning
    Estate Planning
    Financial Planning
    Financial Planning
    Insurance
    Investing
    INVESTMENT JOURNAL
    Mistakes
    Net Worth Update
    Retirement
    Tax
    Thrift

    Archives

    October 2017
    August 2017
    May 2017
    April 2017
    February 2017
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    January 2011

Powered by Create your own unique website with customizable templates.