Expansive Habit

If you set aside your smoking habit $ at 4% compounding monthly, it would grow to over $29,000 in 10 years. You would owe tax on the increase every year.

However, if you put that $2,400 annually in an IRA it would grow to over $103,000 in 25 years at the same rate. Its growth would be tax free each year.

You would realize more savings if it were a deductible IRA, reducing your tax bill each year. There are more savings if you put it in a Roth IRA.

A Roth IRA at 59.5 years of age, comes out tax free. Your annual contributions are taxed each year you contribute but the $ comes out tax free along with all that it has earned over those years.

A Roth IRA has one other benefit. It can continue to grow and never has to be drawn from. Other IRAs require distributions each year after the age of 70.5.

My example uses 4% annual interest rate. Historically the stock market has returned closer to 9%.

'til later