Investment & Retirement

Compound interest earns returns on your original investment PLUS previous returns. Example: $10,000 at 7% compounded annually becomes $10,700 after year 1, then $11,449 after year 2 (interest on $10,700). Over 30 years, $10,000 grows to $76,123 without adding a penny.

At 7% annual return (stock market average): $19,672. At 4% (savings account): $14,802. At 10% (aggressive investing): $25,937. Adding $500/month: $10k + contributions = $103,000+ at 7%. The monthly contributions matter more than the initial amount.

Under SECURE 2.0, RMDs begin at age 73 (for those born 1951-1959) or age 75 (born 1960+). Your first RMD must be taken by April 1 of the year after you turn 73/75. After that, all RMDs must be taken by December 31 each year.

RMD = Account balance ÷ Distribution period (from IRS Table III). Example: $500,000 account at age 73 → distribution period is 26.5 → RMD = $18,868. The divisor decreases each year, so RMDs increase as you age.

The converted amount is added to your taxable income for the year. Example: converting $50,000 while in the 22% bracket = $11,000 in additional federal tax. If it pushes you into the 32% bracket, part is taxed at 32%. Plan conversions to stay within a target bracket.

Best when: (1) You're in a lower tax bracket now than you expect in retirement. (2) You have years with low income (job loss, sabbatical, early retirement). (3) You want to avoid RMDs. (4) You want tax-free inheritance for heirs. The break-even point is typically 7-10 years.