Baby Step 4
Invest 15% of household income into Roth IRAs and tax-advantaged retirement accounts
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.
Dave suggests investing 15% of your household income into Roth IRAs and pre-tax retirement plans. Don’t invest more than that because the extra money will help you complete the next two steps: college savings and paying off your home early.
Why shouldn’t you invest less than 15%? Some people choose to invest a small amount, if anything, because they want to get a child through school or pay off the home in a hurry. But the kids’ degrees 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. Bad plan.
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