By M Katie Helle, CPA

Saving for retirement typically is not on the forefront of teens and young adults.  Perhaps it should be because making a small investment for retirement can allow your money to work much harder for you in the long haul.  A Roth IRA is a retirement investment account which allows an individual to contribute post tax dollars provided they have earned income, such as a part-time job.  A Roth IRA stands out from other retirement accounts because the earnings are tax free later in life.  For 2020, an individual can contribute up to $6,000 annually to a Roth IRA.

Here is an example of how this would look if you started your contributions as a teen.  My 16-year old self works part-time at a restaurant throughout high school and college.  I earn $7,000 annually at the restaurant and contribute $3,000 to a Roth IRA.  My parents match my contribution 100% so the total investment in my Roth IRA annually is $6,000.  I finally graduate college when I am 22 and start contributing $6,000 annually since I am employed full time.  I am nearing my 30s and my career is booming!  My annual salary will not allow me to contribute to a Roth IRA any longer.  From age 16 to 29, I was able to contribute a total of $84,000 (14 years x $6,000).  When I reach retirement at the age of 65, my $84,000 investment would be worth nearly $1,000,000 assuming a 6% growth rate, all of which would be tax free.

From the example above, you can see how quickly an investment early on can pay off.  There are a lot of options when it comes to where you invest your Roth IRA.  Get some help from your parents or another adult to get a Roth IRA account opened.  You will not look back regretting this decision!


Katie Helle has been in public accounting since 2009, with experience in individual and small business taxation, specializing in payroll and sales tax reporting and compliance and QuickBooks accounting software. She is an Arizona native and resides in Chandler, Arizona with her husband, young daughter, and two goldendoodles.  Outside the office, she is actively involved with community outreach, enjoys fitness, and can be found with a power tool or two in her hand for her many crafts.