| Other Retirement Accounts The other accounts aren't quite as lucrative as the 401k, but they are still worthwhile. The Individual Retirement Account (IRA) allows you to contribute earned income of up to $6,000 in 2020, or $7,000 if you are 50 or older. As with the 401k, the contributions are pretax. But in this case there is no company match. A Simplified Employee Pension (SEP) IRA is designed for small business owners and self-employed individuals. If you are eligible, you can deduct up to either 25% of your compensation or $57,000 in 2020, whichever is less. As with the 401k and IRA, the deductions are pretax. The Roth IRA is different in that its contributions are post-tax. However, withdrawals from the account are tax-free. The contribution limits are the same as for a traditional IRA, and only earned income can be contributed. There can be penalties associated with taking out funds from these accounts before you reach the age of 59 1/2, which is an incentive to leave this money in and let it work its compounding magic for a long time. There are some exceptions, but I would consider tapping into these funds to be a measure of last resort. Invest Aggressively If you are young and have decades to invest, don't mess around with bonds or money market funds. Put this money to work in either an S&P 500 index fund, or in some other fund devoted solely to stocks. For the passive investor, index funds are great because they have low expense fees, and there's just really not much you need to do. Set up the investment, and let the automatic contributions grow your wealth. A more active investor may split their investments into sectors. They may want a portion in a commodity or international fund. Personally, I devoted about 15% of my overall investments early in my career to the health care sector. That decision paid off extremely well. But you would have also done well investing in other sectors, such as technology. However, if you break your investments into sectors, don't get too aggressive with a particular sector. And don't bet too much on a particular stock. In hindsight, Apple (NSDQ: AAPL) may appear to be a no-brainer, but there was a time that many thought AOL or Enron would rule the world. You can't afford too much single stock or single sector risk, even with decades to invest. Finally, as you do approach retirement, that's the time to start shifting money into bonds. It's a personal preference, but I would start shifting money into bonds if my retirement target was 10 years away. Once those years of compounding are no longer in front of you, you need to get more conservative. But until then, invest as much as you can, and let time and compounding make you rich. Editor's Note: Robert Rapier has just explained a time-proven and methodical way to build wealth. But are you looking for ways to put your portfolio on the fast track? A medical breakthrough has come to our investment team's attention that could pose the single biggest money-making opportunity in biotechnology history. An under-the-radar biotech company has developed a miracle cure that could save 100 million American lives. Don't wait on this one. Developments are happening quickly. With one announcement, the stock could soar. Click here for details. | 
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