…and the Future They Secured
When we last left Cole and Hannah, they’d gone from broke college students to first-time homeowners, with a Roth IRA quietly powering their progress. Read Part One here.
It’s been a few years since Cole, Hannah, and Caleb Morgan moved into their quaint Charlotte home. Signs of life have already left their mark. There’s the time Caleb drew on the back of the bathroom door with his favorite orange crayon, and the vegetable garden in the backyard where Hannah’s finally getting some green sprouts.
Vegetables aren’t the only thing growing, though. Cole’s career has taken off by leaps and bounds. He’s now a director of operations at Duke Energy, earning a whopping $205,000 a year, more than enough to support his family, including their newest addition, baby Harper.
Even though they’ve been building long-term wealth through Duke Energy’s 401(k), they still appreciate the special advantages of their Roth IRAs. Their rising income, however, forces them to confront the Roth contribution limit for married couples, which starts phasing out at $230,000. Since they file jointly, Hannah is allowed to contribute based on Cole’s earned income.
Still, they’re getting close to the line. It’s a valuable reminder that the IRS gives generous tax treatment for investment gains on incomes under $146,000 (single) or $230,000 (married filing jointly), and the Morgans are creeping up to the edge.
A few weeks later, Caleb is sitting in his fifth-grade math class when he feels a sharp rumbling in his stomach. The school nurse calls Hannah, who rushes him to the ER as the pain worsens.
An initial evaluation, CT scan, and surgeon’s consultation reveal that his appendix is about to rupture. Thankfully, quick thinking by the nurse and Hannah catches it in time. Still, an overnight hospital stay and multiple follow-up visits leave the family with over $45,000 in medical costs. Insurance provides some aid, but it still leaves a five-figure gap in the budget.
The unexpected expense rattles Cole, but after some late-night Googling and frantic research, he realizes their medical costs exceed 7.5 percent of their adjusted gross income, meaning they can withdraw Roth IRA earnings without the 10 percent early-withdrawal penalty (though income taxes still apply).
Cole decides that handling the medical bill matters more than preserving the Roth’s balance. Caleb heals quickly, and what could have been a nightmare becomes a battle scar and cool story as he heads into middle school.
A handful of years fly by. Harper becomes a middle schooler herself, and Caleb grows into a young man preparing for college. The whole family gets ready to send him off to good old UNC Charlotte, where the football team is still one-and-nine and parking still doesn’t exist. Unfortunately, college costs skyrocketed faster than the savings they managed to accumulate.
Thankfully, Hannah’s Roth IRA had quietly grown into a six-figure sum. Even though neither parent is 59½, qualified education expenses, such as tuition, fees, and books, allow Hannah to withdraw Roth earnings without the early-withdrawal penalty. Taxes still apply, but with Caleb’s appetite now shifted to the university dining halls, they have plenty of cash to handle that later.
Through medical emergencies and college expenses, Cole and Hannah start to feel like they’re falling behind by the time they reach their fifties. With Harper only a few years away from leaving the nest, the couple dives deeper into retirement planning. They’ve accumulated a few hundred thousand across their Roth IRAs.
However, after meeting with a financial advisor, they learn it may still not be enough to commit to leaving the working world on their own schedule. The good news: once you turn fifty, you’re eligible for catch-up contributions, an extra $1,000 per year, for a contribution limit of $8,000 each. They commit to maxing out every year, and by the time they reach their early sixties, their combined Roth balances have grown to just over $2.5 million.
The couple looks back on a life well-lived; two successful kids from their alma mater, thoughtful planning from the beginning, and a lot of patience and discipline. Cole and Hannah reflect on how their Roth IRAs have served as both a financial shock absorber and a long-term wealth multiplier.
It helped in emergencies, boosted their retirement through catch-up contributions, and now funds Italian summers, trips to see grandkids, and donations to their favorite nonprofits.
In retirement, Cole volunteers a few times a week with UNC Charlotte’s College of Engineering, mentoring students headed into the industry he spent decades in. Hannah volunteers part-time at a local elementary school, reading with underprivileged children whose parents don’t have time to help with homework.
Through wise saving and planning, the Morgans were able to secure their future, build wealth, and lay a financial foundation that set them up for tomorrow, the next day, and far into the future.
