Hi Money Minder,
Hey there! I’m new to this whole investing thing, so bear with me if I sound a bit clueless haha. I recently opened a Roth IRA account with Vanguard and maxed it out at $7,000. I think I’ll be able to keep maxing it out every year since I’ve been pretty good with my savings. In my Roth IRA, I have 85% in a VOO ETF and 15% in VTX. I did some digging on ETFs and this allocation seemed like the smartest move for me. A little bit about me – I’m 25 years old, making $76k a year, and I also have a decent side hustle going on.
So, my burning question is: how much of a return can I realistically expect on my investment? I know I can’t touch my money in Vanguard until I hit 59, and that the stock market can be all over the place, especially with VOO and VTX being long-term investments. But, going by the average history of the stock market, what kind of return could I see if I keep putting in $7k every year for the next 30 years?
I’ve got this constant worry about never being able to retire, so I’m really focused on starting early and securing my financial future as much as I can.
Looking forward to your insights,
Hoping to Retire Happy
Response from THE MONEY MINDER:
Hello There,
Congratulations on taking the first step towards securing your financial future by opening a Roth IRA at Vanguard and maxing out your contributions! It’s impressive that you’re thinking about investing at such a young age, and your dedication to continue maxing out your Roth IRA annually shows your commitment to long-term financial stability. Your choice of allocation in VOO and VTX is solid given your age and risk tolerance.
Considering historical average returns in the stock market, which can vary, it’s realistic to expect an average annual return of around 7-8% over the long term. With your contributions of $7,000 annually for the next 30 years, compounded returns could potentially grow to a significant amount by the time you reach retirement age. Keep in mind that the stock market fluctuates, so there may be years where your investments perform below or above this average. However, by staying consistent with your contributions and diversified allocation, you are setting yourself up for a potentially successful retirement plan.
Living in fear of never retiring is a valid concern, but by starting early and making sound financial decisions like you are doing now, you are already ahead of many others. Remember to stay disciplined, monitor your investments periodically, and adjust your allocations if needed based on your goals and risk tolerance. All the best from THE MONEY MINDER as you continue on this journey towards a financially secure future.
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