This is a story of how to grow more in your retirement account. Following is an account of one of my retirement investments which has well exceeded the returns of my other accounts.

I have three individual retirement accounts – all at Vanguard (irrelevant to my story but I want you to know it nonetheless):

1. Rollover IRA – my 401(k) contributions (albeit tiny, to start) began in 1997
2. Roth IRA – my first contribution to this was in early 2005
3. SEP-IRA – I began contributing to this in early 2009

Take a guess as to which of the above accounts has performed the best?

Here are a few additional considerations before you answer:

• All three have been similarly diversified between stocks and bonds.
• The Rollover IRA far outperformed the others when considering my employer match. We’ll ignore that amazing fact for now and address it in another blog soon.
• The returns on the Rollover and Roth IRAs were about identical, despite the different start dates.

(Is this is feeling like one of those “word problem” brain teasers that your fifth-grade math teacher gave you? Yes, except that this one is meaningful and relevant. No trains here.)

Okay…what’s your guess?

If you guessed that the SEP-IRA did the best….you are correct!

But why?

The 2008 recession. The stock market hit its low for this period in March of 2009. I made my first contribution to that self-employed IRA account in April. And the markets have more than doubled in the eleven years since then.

How much better did this 2009 investment do?

     My annualized return has been 2% higher than for the other two IRA accounts.

What’s the big deal about 2%?

    This 2% internal rate of return (IRR) means that my balance is 14% higher than it would be if I had earned the same IRR that my other IRAs did.

What does 14% more look like?

• For my account today, it’s an extra $26,000. (Yes please, and thanks!)
• For a $1,000,000 account, that would be an extra $140,000!!!

Our recent market activity looks quite similar to what we experienced in 2009. If you haven’t started investing yet, or even if you have…NOW looks like an exceptionally good time to jump in and begin or do more.

Was I nervous in 2009 to put my money into a highly volatile market?

YES.

Did I know that we had just passed the bottom and it was only up from there?

NO.

Am I glad I invested while the market was down?

BUCK YEAH I AM!

It is not too late. While the best time to have started may have been five or eleven or twenty years ago…the second-best time is right now.

Do not wait – invest today to grow more in your retirement account.

Sign up at www.buckthebudget.com to learn how to best invest by paying yourself first and to start your financial plan.

Giddy up.