A modest Roth IRA contribution, if made early and invested well, will eventually be worth much more than a large contribution made later. Consider this comparison:
- Alan makes his first $3,000 Roth IRA contribution when he’s 20. After six years, he stops making any more Roth IRA contributions. His Roth IRA earns 12 percent per year.
- Betsy makes her first $3,000 contribution when she’s 26. After giving Alan a six-year head start, it will take Betsy 33 years to catch up to Alan, assuming that same 12 percent annual return.
That is, Alan