Years and years ago, I started my first IRA when I was 20 years old. I’m going out with myself, but it was when interest rates were in the double digits. I still remembered how excited my husband and I were when each of us invested $ 2000 in our individual retirement accounts or IRAs.

A traditional IRA is basically an account that allows you to set aside funds for retirement and the money will grow tax-deferred, which means you won’t have to pay income taxes until you withdraw it. Plus, you can deduct that investment from your income on your tax return. It is a very good offer, especially if you start saving when you are very young.

Take a look at the chart on Dave Ramsey’s website called Junior’s Clubhouse that shows not only the power of compound interest, but also the power of starting early. I was so excited to have found this graphic. I suggest you print it out and share it with all the young people you know.

Compound Interest Secret:

In the chart mentioned above, basically the first person starts their IRA with $ 2,000 at age 19 and stops at age 26 (total investment is $ 16,000). The second person waits until age 27 and continues saving until age 65 (total investment is $ 76,000). At age 65:

• The person who invested $ 16,000 has $ 2.2 million
• and the person who invested $ 76,000 has $ 1.5 million

Why is this? It’s because of the power of compound interest and starting early!

Those IRAs that my husband and I started at age 26 would be worth $ 28,000 today each with a 10% return. This is just a great way to build wealth.

There are 3 mistakes I see people make with their IRAs:

The first mistake is simply not having one. One of the big problems that many women have is that they love to earn money and they love to spend it. Saving, much less investing, is not an important item on the agenda. If you’re making money and don’t have a tax-deferred retirement plan, I suggest you go to your financial planner or your bank right away and set one up. You can talk to the advisor about the appropriate type of IRA because there is also a Roth IRA that doesn’t get a tax deduction, still grows tax-deferred, and the income comes out tax-free. The advisor can also help you select an appropriate investment vehicle for the IRA account. Sometimes you can set them up for very little money and even add as little as $ 100 per month. Get started.

The second mistake I see people make is not diversifying. Again, get some tips on how to invest your money. There are mutual funds and exchange-traded funds that operate like a mutual fund by providing you with diversification. The goal is to have a variety of investments based on your age and risk tolerance. Also, you want to see the investment cycles. Right now, bonds have been in a 30-year bull cycle due to falling interest rates. Investing in bonds at this time could be very risky because when interest rates go up, bonds can lose a lot of value. So, get the advice of an expert, and then rebalance your portfolio annually.

The last mistake people make is with their beneficiaries. This week, I was reviewing my self-directed IRA account in which I own real estate and unlisted stocks. When I opened the account, the company was called Entrust. A few years later, the Quest IRA took over Entrust. To my surprise, Quest did not have my beneficiary designation on file. It always makes me laugh when I see something like this happen to me because I’m a certified financial planner and I should know better, right? So with all the consolidations and mergers, it’s really important to review those beneficiary designations. IRA accounts prevent probate, and in many cases, when properly structured, tax benefits can be passed on to the recipient upon death. If the beneficiary designation is not correct, it can have dire tax consequences.

So those are my 3 IRA tips: Start one – Diversify – Upgrade those Beneficiaries.