Retirement likely isn’t on everyone’s list when they’re running across campus to class, working internships and doing homework.
But believe it or not, the financial choices we make in our 20s can change whether we retire comfortably or struggle to catch up later. One of the best, and in my opinion the absolute best, tools for young people is the Roth IRA. Thanks to recent changes in U.S. tax law, there’s even more reason to start early.
A Roth IRA (Individual Retirement Account) is a retirement savings account that works differently than all other retirement accounts. With a Roth: First, you contribute money you’ve already paid taxes on. Second, investments inside the account grow tax-free. And third, withdrawals in retirement are also tax-free.
The current contribution limit for people under 50 is $7,000 per year. You only need earned income to contribute, so for students with summer jobs, internships or part-time work, you can invest in a Roth IRA. Even small contributions can make a big difference.
Let’s say you graduate and start maxing out your Roth IRA from age 23 through 28. That’s just six years of contributions at today’s $7,000 limit. $42,000 invested in total. If you never add another penny and let the account grow at a modest 7% annual return, by the time you’re 65, it could be worth, provided that the average annual growth rate over your lifetime of the stock market is 7% (which historically has been even better than that) around $500,000. And since it’s a Roth, that entire amount is yours to keep. No taxes owed in retirement. Additionally, you could keep on letting it grow. Wait until 75 to make withdrawals, and you have 1.2 million tax-free.
This is the magic of compounding: the earlier you invest, the harder time itself works for you.
Further, the Roth IRA income limit to make a full contribution in 2025 is less than $150,000 for single filers, and less than $236,000 for those filing jointly. If you’re a single filer, you’re eligible to contribute a portion of the full amount ($7,000 limit) if your income is $150,000 or more, but less than $165,000. For those married filing jointly, the income range to contribute a portion of the full amount is $236,000 or more, but less than $246,000. If you’re a single filer and your income is $165,000 or more, or if you’re a joint filer (married) and your income is $246,000 or more, you’re ineligible to contribute to a Roth IRA.
So, if you’re lucky enough to eventually make a high income in your lifetime, then that’s another reason to start investing sooner rather than later. Otherwise you may make too much money later in life to be able to contribute to your Roth IRA.
So, why is it urgent to contribute to your Roth now more than ever?
In July 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) which is making permanent many of the individual tax cuts that were supposed to expire at the end of 2025. On the surface, this looks like good news: lower taxes today mean more take-home pay and lower rates when contributing to retirement accounts.
But there’s a tradeoff. By extending these cuts without fully paying for them, OBBBA is projected to add trillions to the national debt by 2034.
And the bigger the debt grows, the more likely it becomes that future lawmakers will have to raise taxes to balance the budget. That means young people, Grinnellians, may face higher tax rates during their prime earning years or in retirement.
That’s why Roth IRAs are especially appealing now. You lock in the near future’s low tax rates and shield your retirement money from whatever higher rates may come decades from now. Additionally, it’s very easy to set up an account. Just type “Roth IRA” on whatever site you use to invest (Fidelity, Schwab, Vanguard, etc) and there will be simple instructions to set one up. It takes less than 20 minutes.
It’s easy to push off retirement planning until after grad school or your first “real” job. But starting early gives you three advantages. The first being compounding time: Your dollars have decades to grow. The second being low tax rates: Contributing now means paying less in taxes upfront. The third is future protection: If OBBBA eventually forces higher tax rates, your Roth IRA withdrawals will stay tax-free.
Even small contributions during or right after college can set you up for long-term success. Starting in your 20s means you won’t have to save as aggressively later in life.
Grinnellians are known for being forward-thinking, and when it comes to finances, a Roth IRA may be one of the smartest moves you can make.
With OBBBA lowering taxes now but increasing the risk of higher rates in the future, locking in today’s benefits could mean hundreds of thousands more dollars in your pocket decades from now to be generous with and live comfortably.
Your future self — retired, relaxed, generous and grateful — will thank you.
