A Roth IRA is NOT an Investment. It’s An Account.

Written By Josh

Most people think opening a Roth IRA and adding money is all they have to do.

But what they miss is that you still have to invest the money you add to the account.

That one misunderstanding can quietly cost you five or six figures over your lifetime...

The Roth IRA Mistake Nobody Talks About

Here’s what happens all the time:

Someone opens a Roth IRA (great start), adds a few thousand dollars (also great)… And then never invest it.

They assume the money is “working” when it’s really just sitting in cash.

If you log into your Roth IRA right now and see something like:

  • VMFXX

  • SPRXX

  • FDRXX

  • SWVXX

…you’re not invested. You’re sitting in cash.

That’s a cash fund. Not an asset that grows.

Which means your money is just sitting still while inflation eats it alive.

Think of a Roth IRA like a special bank account for stocks. 

You still have to select which stocks you want to hold in the Roth IRA once you add cash.

Let’s Look at the Numbers

If you put $5,000 in a money market fund (cash) for 30 years, you might end up with ~$6,000.

That same $5,000 invested in the S&P 500 could grow to ~$87,000+ over the same period.

The gap between saving and investing is massive… Even if money market funds pay a little bit of interest.

So What Is a Roth IRA?

Think of a Roth IRA like a tax-free account machine.

  1. You add money you’ve already paid (or will pay) taxes on.

  2. You invest the money you add.

  3. Your investments grow inside the account.

  4. And when you withdraw it in retirement? It’s completely tax-free

That’s why the government limits how much you can contribute to it.

If it wasn’t powerful, they wouldn’t care.

Here’s Why Roth IRAs Are So Powerful:

  •  Your investments grow 100% tax-free

  • You can withdraw your contributions (not profits) any time

  • You can withdraw the profits tax-free at age 59½ (if you’ve had the account for at least 5 years)

  • You can contribute up to $7,000 in 2025 ($8,000 if you’re 50+)

But There Are a Few Rules to Know…

  • You must invest the money, it doesn’t grow until you do

  • You can’t contribute directly if you make over $150,000 (single) or $236,000 (married) but you can use a backdoor Roth strategy to get around that.

  • If you withdraw profits early, you’ll pay taxes and a 10% penalty

  • You can only contribute if you had earned income that year

  • The $7,000 limit applies across all your IRAs: Roth and Traditional combined

What Should You Invest In?

Inside your Roth IRA, your goal is simple: Pick long-term investments that grow over time.

Some options to consider:

VOO – S&P 500 ETF

FXAIX – Fidelity’s S&P 500 fund

QQQM – Tech-focused ETF

SCHD – Dividend-focused ETF

These are proven, diversified, and easy to manage.

They’re the building blocks of a solid long-term strategy.

If you need help understanding the different options I go over these in detail in Money Mastery.

For what it’s worth, I have my Roth IRA invested with Fidelity using a simple index fund strategy (mainly FXAIX, their S&P 500 fund). 

But I also recently opened a second Roth IRA with Robinhood because they’re offering a 1% match on contributions right now. 

Yes, you can have multiple Roth IRA accounts but the total contribution limit is still $7,000 per year (as of 2025).

That’s across all your Roth IRAs combined, not $7k per account. 

So this year, I only contributed to my Robinhood IRA to take full advantage of the match and leaving the Fidelity one untouched.

How to Actually Invest the Money

  1. Log into your Roth IRA account (Fidelity, Vanguard, Robinhood, etc.)

  2. Check where your money is currently sitting: If it’s in a money market fund like VMFXX or SPRXX, it’s not invested

  3. Search for an investment like VOO, FXAIX, SCHD

  4. Buy it (even just a few shares to start)

  5. Set up auto-investing so you’re stacking assets every month automatically

This one move can change your entire financial future.

You’re Not Behind Unless You Stay There…

If you made this mistake, don’t beat yourself up.

Most people were never taught how these accounts work. The important part is catching it.

Just don’t wait another year assuming your Roth is “doing its thing” when it’s not even in the game yet.

If you want help building your own investing system (step-by-step and beginner-friendly) that’s exactly what Money Mastery was designed to do.

You’ll learn how to invest with confidence, avoid expensive mistakes, and build wealth over time even if you’re just getting started.

Josh

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The "Diversified" Mess