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CHICAGO (Reuters) - While it's not trending as high on Twitter as #oomf (which stands for "one of my followers"), the hashtag #rothiramovement is hot in the personal finance Twitterverse right now.
Hashtags help Twitter users track a certain topic, and the Roth hashtag is being promoted by more than 140 bloggers. Many more social media users are retweeting, liking on Facebook and otherwise trying to achieve a singular goal: to boost interest in Roth IRAs among young people.
The so-called Roth IRA Movement is the brainchild of Jeff Rose, a financial planner from Carbondale, Illinois, who runs a blog called Good Financial Cents (goodfinancialcents.com) and is a big promoter of Roths.
Unlike a traditional IRA, Roth contributions are made with post-tax dollars; contributions and investment returns come out tax free as long as the account holder is over age 59-1/2 and the account has been established for at least five years. A growing number of employers offer Roths in workplace retirement plans.
The need for Roth education isn't limited to young investors, though, according to a new survey by T. Rowe Price. The study shows that many investors don't fully understand the differences between Roths and traditional IRAs. For example, about one-fifth of investors age 21 to 50 mistakenly thought that traditional IRAs let investors withdraw contributions and earnings tax free -- which is actually a key feature of the Roth, not the traditional IRA.
Rose was spurred to action after giving a campus lecture on budgeting and investing at his alma mater, Southern Illinois University (SIU), also in Carbondale. He asked for a quick show of hands of everyone in the room who had ever heard of a Roth IRA. No hands went up.
"I wouldn't necessarily expect college seniors to know much about Roths, but I've given a number of talks to high school and university classes, and I usually get at least a few who have heard of Roths," he says.
Rose turned to his blog and social media sites like Twitter (he's @jjeffrose, with more than 6,000 followers) to vent his frustration, and decided to start a movement (link.reuters.com/keh47s). "I asked a big group of bloggers if they'd be willing to blog about the benefits of the Roth IRA all on the same day to help me start a Roth IRA movement."
Rose's motivation extends well beyond Roth accounts. Although most of his clients are aging baby boomers, he's passionate about boosting financial literacy among young people, and getting them to start saving young.
"I talk all the time with adults twice my age who regret the fact that they didn't start saving or investing earlier. The most common excuse I hear is that they just didn't know better," he says.
Retirement savers should first take advantage of an employer's matching program, if offered, since that's free money, says Stuart Ritter, senior financial planner at T. Rowe Price. Any funds invested after that point should go into a Roth, where you can contribute up to $5,000 annually, so long as your income is below $110,00 (single) or $173,000 (married).
Adds Ritter, "If you put $5,000 into a Roth account today, you've given up that spending power, so you want to make an investment choice that gives you the most return at retirement. A Roth will give you more money to spend down the road when you retire."
Roths offer much more flexibility in retirement. Unlike tax-deferred retirement vehicles, Roths have no Required Minimum Distributions (RMDS) after age 70-1/2, and your heirs could withdraw money from your Roth tax free as well.
Rose already is working to extend the success of the Roth IRA Movement. He's teaming up with other personal finance bloggers to launch a regular series of online events, mainly targeting young people, under the name "The Money Uprising."
"I'm a Gen Xer myself," he says. "We're the group that needs the most help."
Editing by Beth Pinsker Gladstone, Lauren Young and Andrea Evans