*This post contains affiliate links and is not an investment or tax advice, please speak to the appropriate specialists*
New Year, new investment strategy
I recently made an adjustment to my investment strategy. I have a Traditional IRA with Charles Schwab (if you click the link and open an account we both get a referral bonus depending on how much you open the account with), that is from a rolled over 401K. Now that I live abroad so that means I cannot contribute nor actively invest into it as I do not have any U.S based income. A traditional IRA is not only a retirement account but it has the added benefit of being a tax-deferred account. This means if you contribute up to $ 6000.00 annually, dependant upon your age, you can claim in on your tax return, and possibly lower your tax bill. You’ll have to talk to your accountant to make sure that you are eligible.
However, saving for your retirement is a necessity. According to the U.N. 2019 data, the average life expectancy is 72.6.
So, until I have U.S based income I will continue to invest using the Robinhood investment app. If you choose to open an account using the link, we both get a benefit of a free share of a stock! I talk about their benefits here in another post.
Why did I update it?
Back to why I have decided to reinvest my dividends. All of last year, I had it set to pay out and I would save up for a new share that I wanted. It was taking too long to do that and I was earning .01% APY on my paid-out dividends by leaving it in the savings account provided by Charles Schwab. I lost quite a bit of money doing that in retrospect.
So, this year I decided to reinvest and not bother the account other than a few check-ups every so often. I even made you a little diagram. So, you can compare.
As you can see from this diagram at the end of the year, assuming Maria buys no stock because she is saving it and leaves it in a .01% savings account she will have earned on the dividends. She earns less than 1 cent each month whereas Gloria now has $70.00 in shares.