Am I Too Old to Invest with a Roth IRA?

Roth IRA

I recently received this question from a reader about investing with a Roth IRA closer to retirement:

“I am a public school teacher, 46 years old. I have a public employee pension that I contribute to and can begin collecting on once I retire. I will also obviously have S.S. money. I have no credit card debt and have paid off all student loans. I have some extra money to play with. I was wondering if it makes sense at 46 to open a Roth IRA now if I plan to retire in 9 years and will no longer have much income to invest in that Roth. Does 9 years of say, $3500 a year, into a Roth make much sense. That would leave me with very little extra spending money during those 9 years.”

Thanks for your question. Congrats on a successful financial scene. You’ve made great progress!

This is a good question to be asking. My short answer is yes, it’s worth it. Even if you only invest half of that amount, you’ll be putting an extra bit of money aside for retirement. Every dollar counts.

The Roth IRA is certainly touted to the young as a great way to save for retirement because: 1. the young have a long time until they retire – therefore, more opportunity to make earnings tax-free; 2. the young are likely in a lower tax bracket now than they will be when they retire – again, saving tax dollars on the back-end.

But the Roth IRA can still be beneficial to people in their 40s and 50s.

The good thing about a Roth IRA is that it’s super flexible when it comes to withdrawal.

  • You never have to use the money if you don’t want to. You could just pass it along to your heirs.
  • You could wait to withdraw the funds way down the line…like when you are 70. Your investment would be worth a lot by then.

As a reference point, $250 ($40 short of your example) invested monthly for just nine years would be worth $150,000 by the time you are 75, given a 7% return. And you wouldn’t pay a dime in taxes on that money.

  • You could withdraw it all (except the earnings) at anytime. So if you decide 2 years from now you just want the cash to go on a nice vacation, you can do that. Just be sure to leave the earnings alone.

A Roth also is very flexible in the type of investment you want to make. You could keep it in cash, CDs, equities, bonds, real estate, precious metals, etc. So you can really throttle your risk exposure.

Finally, while I’m a fan of the Roth, it’s also possible that a Traditional IRA may make sense given your current income and tax levels. I’m not fully aware of your situation, so it might be wise to sit down with a CPA or fee-only CFP to ask them which account makes more sense. My money is on the Roth, but there could be nuances that make the Traditional IRA more beneficial.


So those are my tips for the reader. What are your thoughts on the situation? Leave your suggestions in the comment section below.

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  1. As for not paying a dime in taxes on the $150k…that’s a bit misleading, considering the full amount of the contribution would be taxed at current rates.  If the teacher is in a higher tax bracket now than they expect to be during retirement, then a Traditional IRA is likely the best bet.

  2. Avatar DenverEric says:

    I think at that age, an IRA is a great idea, but the traditional IRA more than a Roth. As you note, the time horizon for the money to grow is a big benefit. But with a traditional IRA, the tax deferral for 9 years is probably worth more than the growth of the assets.

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