Becoming a TAX FREE Millionaire with $10 Per Day: The Roth IRA Explained!

Описание: How YOU can be a MILLIONAIRE with Tax-Free Investing using the famous Roth IRA retirement account in 2020!
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A Roth IRA is just a type of retirement account, it stands for Roth Individual Retirement Account.

In the Roth IRA, your profits and earnings in the account grow tax FREE. Yes, you heard me. When you withdraw the money, you don’t pay any taxes. There’s a popular saying that says the only 2 unavoidable things in life are Death and Taxes, well at least with the Roth IRA we can get around paying taxes on gains.

If you're able to invest $10 / DAY into this Roth IRA, you can become a millionaire in 40 years if you average a 8% return. If you contribute the maximum of $6000 a year for the next 40 years, you'll have a whopping 1.8 MILLION dollars after 40 years.

The current contribution limits are $6000 /year if you’re under the age of 50, or $7000 over the age of 50 which acts as a catch up mechanism.

When you're young, you're in a lower tax bracket, for example at the age of 22... I was in the 12% tax bracket, so when you do contribute your after tax dollars into your Roth IRA, you are planning on hopefully being in a higher tax bracket by the time you retire. So it's ADVANTAGEOUS to you to start young and invest your after-tax dollars NOW while your tax bracket is low. You are making a small sacrifice for potential gains later!

One of the biggest advantages of having the Roth IRA is that you're always able to withdraw contributions out, so whatever you put into it - you can take out at any point without penalties or paying taxes on it.

The ultimate time to invest in the Roth IRA is when you're young to take advantage of COMPOUND interest. I suggest you watch my Compound Interest video (linked below) because it will really inform you how Compound Interest works and the miracle of compound interest within your Roth IRA.

Now as far as what to invest in, in the video I use the example of investing in an S&P500 Index Fund, since that's a well diversified investment and it's something you can hold for a long period of time.

There are a few extra things you must know about the Roth IRA:

This is a RETIREMENT account, so if you do withdraw before the age of 59.5, you’ll pay a 10% penalty on your earnings, and the earnings are also taxed as ordinary income, so by investing in this you are saving for your FUTURE. Don’t get this mixed up with some of the other investment strategies out there that are trying to get you rich in the next 2 hours, I’ve found those just don’t work that well.

To avoid penalties:
o You can avoid the penalty if the withdrawal is due to certain disability or financial hardships
o You can use some of the money (up to 10k) for a first time home purchase, or qualified education expenses
o Or if you somehow pass away sadly, your beneficiary can make the withdrawal on your behalf without a penalty

There are income limits to the Roth IRA, if you’re making more than 137k a year, you sadly are not able to contribute to a Roth IRA.

The biggest difference between the Roth and Traditional IRA is the timing of the tax advantages, the Traditional is just the opposite, you’re not taxed on contributions but you’re taxed when you withdraw it.

Hopefully this helps! Leave a comment if you have any questions.

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Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!