The Easiest Way to Become a Millionaire (Roth IRA)

PortalKota – The Easiest Way to Become a Millionaire (Roth IRA). Hey welcome back to the channel, I’m Suzanne with Arvabelle and in this video I’m going to show you the easiest method to becoming a tax-free millionaire.

How you can do this is by opening up a Roth IRA. An IRA is an individual retirement account. So a Roth IRA is a type of account.
Opening up the account itself won’t do anything for you.

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You actually have to invest the money, that’s inside of the account, But once you do start investing all of your profits can start growing tax-free.

But how does it grow tax-free? So, with other account types like 401 ( k, ) s, which I talked about in the last video, you contribute pre-tax money. So that’s money coming out of your income before you pay taxes on it and you would be able to write off those contributions.

The Easiest Way to Become a Millionaire (Roth IRA)

But a Roth IRA does not work like that With a Roth IRA, you’re contributing post tax money, So that’s money that you’ve already paid taxes on Generally.

That means that you’ll have a little bit less money to invest upfront, but any profits that you generate. In your Roth IRA, account are tax-free as long as you take them out after you’re 59 and a half
In 2019, you can’t contribute more than $ 6,000 to your Roth IRA.
That’S the absolute maximum. You also can’t contribute more than you earn in a year.

So if you’re young and you have a summer job and you only make $ 2,000 for the entire year, you can’t contribute more than that.

Anytime. You take money out of your Roth IRA. You can’t just put it back if you’ve already hit that $ 6,000 limit.

So if you contribute $ 6,000 and then you take some of it out, but then you change your mind and want to put some of it back you can’t Whatever you contribute to your Roth IRA, you can withdraw at any time without paying taxes or penalties on It
If you want to withdraw profit from a Roth IRA, you will have to pay taxes on it and you will have to pay a 10 % penalty And paying taxes and a penalty kind of defeats. The purpose of opening a Roth IRA in the first place,
Something that’s pretty common to do is to invest in index funds that follow the overall movement of the stock market.

So the stock market moves at about an average of 7 % a year. Now, that’s an average

Some years it’ll be way up some years. It may be way down, but overall, by the time you retire.

Hopefully these index funds will have grown about seven percent a year.
It’S best to start investing in a Roth IRA when you’re young, for several reasons, Number one, that’s just more years that you can contribute to the account and the more that you can have your compound interest working for you.

I’M going to pull up a Roth IRA calculator which I’ll also link to down below just to show you the difference in how much money you could end up with, depending on when you start investing.

So I’m going to use the maximum annual contribution of $ 6,000 retiring at age 65. Let’S say that it grows by 7 % a year and your current age is 18
By the time you retire when you’re 65, you could have over $ 2,000,000 in your account, So you’ll see on this graph at the bottom, that it shows a Roth IRA number and a taxable savings number, and that’s just showing the difference of investing in a Roth Ira versus a different account like a 401k, where your earnings will be taxed when you take them out Now.

If we change the age that we’re starting to 23, you could still have 1.5 million dollars in your account if it’s growing at 7 % a year.

But if you wait until you’re 30 to start investing, you’ll only have $ 900,000 in your account.

So you can see it that it definitely makes a difference to start investing early
Another reason to start investing when you’re young is because most likely you’re earning less now than you will in the future, If you’re not earning as much money right now.

That means that you’re in a lower tax bracket and you’re paying less taxes than you would in the future.

So it’s in your best interest to start using that money to invest now On the flipside.

If you’re earning a lot of money now and you anticipate that you’ll be in a lower tax bracket in the future, there are other accounts that are probably better suited for you.

If you do make more than $ 120,000 a year, but you’re still interested in opening up a Roth IRA, you can look into doing a backdoor Roth IRA.
I’M not going to go into it now, but you can definitely google it and find tons of information on it.

Also, if you’re under the age of 18 – and you have a job, you can actually set up an Roth IRA.

You’Ll just need your parents to help. You There are lots of brokerages where you can open up Roth IRA accounts like Vanguard, Fidelity, Charles Schwab, just look into whichever brokerage you want to use and make sure that they don’t have high fees.

Leave a comment down below and let me know what you think of the Roth IRA millionaire strategy.

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