PortalKota – $6,000 tax-free Millionaire: Roth IRA Explained. What if I told you that you could become a millionaire by taking this one piece of advice and worst case scenario – you become a 500,000 heir.
I think that makes sense, hey friends, its Jared from debt-free blueprint and in this video we’re going to be talking about what a Roth IRA is, why you need one and how it’s possible to become a millionaire by investing in one.
This is probably going to be one of the most important videos that you watch for learning how to truly become wealthy without paying taxes, so Hulk smash that thumbs up button.
So we can make sure that other people know about this. I so wish that someone would have given me this advice when I was younger, but they didn’t.
$6,000 tax-free Millionaire: Roth IRA Explained
So that’s why I want to make sure that you know the ins and outs of this whole thing so that you can become a millionaire a lot easier than me. Leave a comment down below letting me know your thoughts on investing in a Roth IRA.
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There’S also links to playlist in the description, if you want more personal finance and investing videos, just like this one, starting in 2019, the max amount of money that you were able to invest in your Roth IRA is six thousand dollars per year or five hundred dollars Per month, so, if you’re married and you each earn an income, then each of you can invest up to six thousand dollars starting this year. The sooner you invest in a Roth IRA, the better after you watch this video.
I highly recommend setting up an account and funding funding it as soon as possible for one main reason, and that’s time time invested is so important. The longer your money is in the market, the more time your money has to grow through compound interest.
Just so, you know how important time is, let’s say, person a B, C and D: all invest $ 1,000 each and didn’t invest any more money between now and the age of 60.
The only difference between any of them is their age and the amount of time that they had their money invested person a is 20 years old. So after 40 years, his $ 1,000 investment is worth almost fifteen thousand dollars.
Now, let’s move down to person D, they are 50 years old. So after 10 years their money has the potential to only be worth a little less than $ 2,000.
They all have the same return and they invested the exact same amount. But the person who had been invested in the mortgage forty years as opposed to ten years has almost eight times the amount.
I know it’s absolutely insane, so please take a minute to pick your jaw up off the ground once again.
The only difference is the amount of time that their money is sitting in the market, taking advantage of compound interest and reinvesting their dividends.
When you hear the word Roth, that basically means after-tax money. That’S the money that you actually receive in your bank account from your employer after they’ve, taken out all the taxes that you owe now.
I array stands for individual retirement account. It’S another retirement investment account.
You can invest in outside of your retirement accounts like a 401k or 403b. Put those two words together and you have yourself a Roth IRA, a retirement account you can invest in with after-tax money.
Only the nice thing about an IRA in general is that the majority of people are able to invest in the downside.
Is that it’s self-directed? So most people don’t even think about investing in one because they either didn’t even think about it or they’re too worried, because they don’t know how to do it.
Hit that subscribe button, because I have more videos coming out to help you out with this sort of thing.
One easy mistake that a lot of people make when thinking through what a Roth IRA is is that they think that they just need to invest.
In a Roth IRA and that they’re completely done, but an IRA isn’t an actual investment, think you put like a bucket with in that bucket, you could have all kinds of different investments.
You could own share some individual stocks, like Amazon, Apple Tesla, you could own different. Low-Cost index funds, bonds or even REITs within this IRA bucket, you can also trade in and out of these stocks and funds without paying capital gains.
So when we’re talking about a Roth IRA, we’re talking about the actual bucket itself, not necessarily what type of investments you were putting into that bucket I’ll give you an idea of how some of my IRA money is invested later in this video.
An amazing thing about the Roth IRA is that, because you are investing with money that has already been taxed today, your money will be able to grow and with be withdrawn, tax-free. Once you hit the age of fifty nine and a half, this is a huge deal.
So if you invested a hundred and sixty six dollars per month into your Roth IRA every month for thirty years straight, and you assumed a seven percent return on your money, then starting at the age of 59 and a half, you could withdraw that $ 188,000 and Pays zero taxes on that money? Yes, you have that right.
That means you have that money deposited in your bank account and you could walk right up to the counter and withdraw all of that money at once.
You’D actually have to call ahead to make sure that they had that money on hand.
For you one time I tried to withdraw $ 3,000 in $ 1 bills, and I had to order the money ahead of time, so they had it ready. Yes, they thought I was going to a strip club, but that was not my plan. I promise, since this is a retirement account with money.
That’S supposed to be used once you hit 59 and a half. If you try to withdraw that money before that age, then you’ll be charged high penalties, but there’s a catch.
When you hear that you can’t withdraw your money until 59 and a half without paying penalties, you may freak out, but I want you to hold on for a minute, because there is a little bit of a loophole for you to know about.
You can actually withdraw the money. You contributed to your Roth IRA before fifty nine and a half without paying any kind of penalties.
As long as you don’t withdraw any of the gains from the account then you’re good to go.
So if you invest $ 3,000 into your Roth IRA this year and you have gains from your investments that increase your total investment to $ 3500, then you can withdraw $ 3,000 at any point in time without paying and of any penalties.
Now, if you withdraw the whole $ 3500, then you would be paying penalties in taxes on that $ 500.
Gain that you made technically, you could treat your Roth IRA, like a mini savings account since you’re able to withdraw the contributions tax-free, but I highly highly recommend not looking at it like this at all.
If you do anything to remove any of the money from your Roth IRA account, even if it’s only your contributions like we just talked about, then you’re losing out in the benefits of time in the market, and we already know how important maximizing that time can be.
For you just pretend in your head, like all of this money, you cannot touch until you’re 59 and a half it’s a gift to help your future self out.
So you have to work until the day that you die. Keep your emergency fund savings separate in a place like a high-yield online savings account and leave this IRA alone.
If you possibly can you can invest money into your Roth IRA any point in time throughout the year, and you could do this through small or large increments as long as they total less than six thousand dollars. For example, you can invest all six thousand dollars on January 1st.
You could invest $ 500 per month throughout the year or you can invest all six thousand dollars throughout the first six months of the year.
Then not worry about it again until you invest in into your Roth IRA again the next year there’s another loophole, though there’s something called a catch-up contribution.
When it comes to your Roth IRA, say it’s January, 1st 2019, and you realize that you forgot to deposit any money into your IRA in 2018, or you were waiting to receive some sort of a bonus on the 1st of the year.
What catch-up contributions allow you to do is invest towards the previous year’s IRA limit, which in 2018 it was $ 5000 up until tax time of the current year.
So you would have up until April 15th of 2019 to invest up to $ 5,500 towards your 2018 IRA, and you could still invest up to $ 6,000 for your 2019 IRA.
I actually took advantage of this catch-up contribution. Once I had my debts paid off and started investing more money into my IRA, it was extremely helpful for me, since I wanted to start building wealth as soon as possible. Anyone with taxable income is able to invest in a Roth IRA as long as you were in some sort of income.
If you were younger than the age of eighteen or know someone who is younger than eighteen, then they’re able to contribute to a Roth IRA as well, but they just need their parents to help them open an account.
As long as that person is earning some sort of income, then they’re good to go.
If you know someone under the age of eighteen, then please please, please help them out with opening an account. You will literally change their life.
You want to know how much you could change your life if you get a 16 year old to start investing $ 1,000 per year into a Roth IRA which comes out to about 83 dollars per month, then when they hit the age of 60, they could have Over two hundred and sixty-five thousand dollars in their Roth IRA, you would be the coolest person they’d ever meet. Don’T worry folks! My battery died.
We’Re good to go. Ideally, they’d be investing more than that as they got older, so they would actually be a multi-millionaire and beset financially a lot sooner for a lot longer back to you, though, you were eligible to invest the full six thousand dollars into your Roth as long as your Income is less than one hundred ninety three thousand dollars if you’re a married filing jointly and less than one hundred twenty two thousand dollars.
If you were single or married filing separately, there’s all kinds of companies out there to open an IRA with places like fidelity, Charles Schwab, Vanguard, betterment and m1 finance. Remember that the IRA is just a bucket that you put your different investments into think of these companies.
As who is holding that bucket for you, you can actually have multiple companies hold IRA buckets for you at once, which platform you choose to invest through is all going to depend on your initial level of knowledge.
I personally invest my IRA through Vanguard and I’ve started to use betterment and m1 finance as well they’re simple and I like their investment options.
I have the majority of my IRA investments in low-cost stock market Odle stock market index funds like VTS, ax and VTI, for lots of different reasons.
Let me know in the comments down below, if you want me to get into more detail when it comes to this sort of thing this year I’ll be splitting my $ 6,000 IRA, investment between Vanguard, betterment and I’ll be using m1 finance as well I’ll make a Video about all of those at some point in the future, if you’re interested in any of those investment platforms and I’ll throw links in the description for you.
So, are you ready to find out how you can become a millionaire or even a 500,000 heir by investing in your Roth IRA? This goes back to how important time is when it comes to being invested.
If you max out your IRA for 40 years and assume a 7 % return, which is a very safe assumption, you will have invested two hundred and forty thousand dollars of your own money.
But your Roth IRA investment could be worth almost 1.2 million dollars of tax-free money.
If you do the same thing for 30 years, you’d have invested a hundred and eighty thousand dollars of your own tax-free money and your IRA account has the potential to be worth over.
Five hundred and sixty-six thousand dollars over half a million dollars of tax-free money for you to take out and spend on who knows what please open a Roth Reince are funding it today with as much as you possibly can up to the max imax on my my Groth IRA every single year, because I know how important it is to my financial future do it, even if you can only invest a few hundred or a few thousand dollars this year.
It doesn’t matter where you go to open an account just make sure that you’re paying attention to the fees that are involved with whichever investment that you choose to go into that Roth IRA bucket.
For yourself asking me any investment questions you have down below in the comments, and I will answer them all for you or maybe make a video for you, make sure to smash that thumbs up button and pick up your free copy of the debt free prep work.
Both hit that subscribe button and the notification bell to get more personal finance videos just like this, so we can start getting you to a point where you are financially free. I’Ll, see you in the next one friends, adios.
