Why College Students Should Invest in a Roth IRA

By: Jasmine York, contributing writer

Although investing at any age is an advantage, it’s not the best idea to wait until your 40s to start thinking about building a nest egg. In fact, young adults who begin investing as little as $3,000 a year in their early 20s have the potential to grow their investment in a Roth IRA to be worth close to $1 million by the time they retire.

The reason being is that Roth IRA’s ensure a more guaranteed return on an investment usually at about a 7% interest earned each year. This can help multiply a $135,000 investment (over 45 years) to a sizable $917,255 nest egg. If you were to wait until your 40s to invest $3,000 a year, you would’ve invested only $75,000 (over 25 years), which would equal only about $203,029 by the time you retire.

Additionally, those who invest in a Roth IRA are allowed to touch the money in the fund for college expenses, to purchase their first home, or for medical purposes without getting penalized, since the main goal is to not touch the money until you’re about 65 years old.

As you can see, in the investment world…time is a huge advantage. Those who start early have a better chance at earning a larger profit than those who begin later on in life.

To learn more about different investing options or to view a retirement calculator, visit bankrate.com.

Photo Credit: CBSNews