I’m new to everything investment and retirement related. Never seen my family do it and never thought about it until now. Assuming I max out on my roth ira every year, and it grows into thousands, and millions as the years go by. How am I technically rich if I can’t use that money? Am I only rich once I’m retired?
Well, that’s kind of a deep question. What do you think it means to be rich?
Since you mentioned “since I can’t use that money”, it sounds like you partially think rich is SPENDING a lot. You can spend a lot right now. Broke people spend a lot. And they’re stressed out and unhappy. All those BMWs you see driving down the street have some stressed out, rat racer dragging himself to work every day to make those $700/month payments on his BMW. Is he rich?
I personally think no one is rich until they decide they have enough. If you don’t think you have enough, no amount of spending will make you rich. I do think you’ll be HAPPIER knowing you have a large Roth IRA and won’t be stressed every day wondering how you’re going to eat when you’re old and if you’re going to work every day until you die.
That said, now let’s say you end up with $2M in your Roth IRA at the age of 45. That’s what we call a “good problem to have”. You can always withdraw the principal (what you put in) tax/penalty free. And WORSE case there’s a 10% penalty. If you paid that penalty on everything, you still have $1.8M to spend. Is that rich?! (Logistically, you would never really need to pay that penalty as there are lots of ways to get at retirement money without being 59.5)
But really, what “winning with money” looks like is this:
- You’re not worried about where your next meal is coming from
- You’re able to enjoy your life now
- You’re putting some of your money away so it goes to work for you
- One day you get to stop working and keep enjoying your life
So there is no “finish line” where you declare that you’re rich and dive into a swimming pool full of hookers and blow and find true happiness. That’s not how life works. You have to enjoy the journey. And if you’re living below your means, and investing early and often, the journey, now and later, becomes much more enjoyable 
THAT’S WHAT RICH IS TO ME.
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Hi Amnah,
I believe you can pull out your Roth IRA contribution after a few years if you really wanted to. I would advise not to because the profit compounds, but I believe you can do that. I would work with a tax specialist to make sure you do it correctly.
Nirav
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Thanks Jeremy for the response. You are right, being rich has different meanings to different people. Just like how a stranger would assume someone is rich just because their parents are rich, but that person would not consider themselves rich because they don’t own their parents’ money.
Thanks for your response Nirav. I definitely am not planning on pulling out my Roth IRA, the whole point of it is to keep it for the future. I come from a wealthy country where saving for retirement is a foreign concept because the government takes care of you. But since moving to the United States I have been having a lot of conversations with myself especially that I see myself living here long term, so I have to start thinking about saving for retirement and making better financial decisions.
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