SHORT – Dave Ramsey Baby Step 4 – Invest 15% into Roth 401Ks and/or IRAs

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When you reach this step, you’ll have no payments – except the house – and a fully funded emergency fund. Now it’s time to get serious about building wealth.

Invest 15% of your household income into Roth IRAs and/or your workplace 401(k), 403(b), 457s if available. We coach 100% Roth accounts for the simple, mathematical fact that you pay tax on the contributions only yet the hundreds of thousands (and potentially millions – yes we said millions) will be tax free in the future. We also do not include your profit sharing, company match, or any other perks from your workplace in the 15% – those are icing on the cake. You do the 15%.

Do not invest any more than the 15% because the extra money will help you complete the next two steps (if applicable): saving for college expenses and paying off your home early.

Some people choose to invest a smaller amount, if anything at all, because they want to get a child through school or pay off the home in a hurry. Listen to us Rock Stars, a kids degree won’t feed you at retirement, and if you throw all your money into your mortgage at this point, you’ll end up having to sell the house and buy the book “72 Ways to Prepare Alpo and Love it!”. It’s a very bad plan. There is no such thing as a retirement loan. Stick with the steps.

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