- Hi, Clint Coons here with Anderson Business Advisors,
and in this video we're going to talk about
how to create a $1 million Roth IRA
in a lot less time than you might think.
All right, with that, let's get started.
(energetic music)
All right guys, so what prompted me
to want to create this video is that I was on YouTube
just lookin' for ideas on what to present on,
and I was searching, you know some of my competitors
out there that again put out videos,
and some of them were really good, and some of them
I questioned sometimes where they're comin' from,
if they're really real estate investors.
But the point is this: I saw this one video
where the individual was talkin' about
how to get to $1 million in a Roth IRA.
And the numbers worked.
I mean, it took you about 37 years to contribute,
and you had to assume that you're gonna get
between 10 and 12% growth on your money
in order to reach those.
And, you know, anything works as long as you put in
the right growth rate into your calculations.
And as you get older, you know, that time compresses,
so then you gotta contribute more and you gotta hope
for a greater return.
Well I thought to myself, you know what,
if you want to save for a tax-free retirement,
and you want to do it through a Roth IRA,
it's gonna take you a long time at $6,000 a year
to get to that point.
So there's another way to do it.
Now, those of you that are familiar with solo 401Ks,
you might be thinkin', "Yeah, I can put in $19,000
"a year and get to that point."
Granted, and you'll be able to cut it by a third
if you're doing that, or two thirds.
But if you want to get there much quicker,
there's an actual, a different way you can get there
using a solo 401K that will push you over the hump.
You'll be able to put in more money in one year
than your neighbor puts in in 10 years.
And they're gonna be scratchin' their heads lookin' at you
going, "How is it that you're livin' the tax-free lifestyle
"and I'm not even started yet because I don't have
"enough money to live on yet,
"based upon my meager contributions?"
It all comes down to knowledge.
And that's about everything we teach, I teach, here
on my real estate asset protection channel,
it's about to empower you with strategy.
Because I truly believe that entities can help you
do more with your investing.
Now how you set them up is equally important.
Sometimes entities can actually hurt you
with your investing.
So you want to make sure you're using entities
the right way, that it's part of an overall structure.
That's why we offer strategy sessions
to people who watch my videos,
and then hopefully you're taking advantage of that
so we can design out a plan that will help you
achieve your dreams, your life goals.
Now how do we get to $1 million in a much shorter
period of time inside of a Roth IRA?
Well it's not through the traditional approaches.
But what it is through is with a solo 401K
and understanding how that entity actually works
and what's available to you.
Let me show you.
So, you've got your corporate entity that sponsors
your solo 401K.
And again, this is only gonna work
if you don't have employees.
If you've got employees, you can tune out right now,
because you're not gonna want to set this up for them,
'cause they're gonna be eatin' at the trough with you,
and it'll probably bankrupt you to do it.
Now you got your corp here,
you set up your solo 401K over here.
And then what you're gonna do is you're gonna understand
what actual buckets are comprised in the solo 401K.
You have your Roth bucket over here,
you have your traditional bucket over here,
and you have your employer bucket over here.
And all that means is this: if I'm workin',
this is my company, I'm flippin' real estate
and I bring in $165,000 in profit this year.
If I paid myself some money, let's say I paid myself
$75,000 in salary, I could make a 401K contribution
of either $19,000 to the traditional
or $19,000 to the Roth.
Well if you want a tax-free retirement,
obviously you're gonna put $19,000 over here
into your Roth IRA.
Now, by doing that, it's only getting you part way
to where you need to be.
Now if you want to go and put this thing on turbocharge
to get to a tax-free retirement to have $1 million
in your account much quicker than anyone else,
you need to understand that inside of these plans,
not only do you have employer contributions,
these are employee contributions right here,
you also have an after-tax bucket from the employee side.
Many people are not aware of this because their employers
never told them this exists,
because they don't offer it in their plans.
We create plans, this is one of the critical buckets
that we put inside of our plan documents to allow people
to really maximize their contributions towards
that tax-free retirement.
So with the after-tax employee bucket,
what you're allowed to do is make up this shortfall
that you have inside of your solo 401K plan, meaning this:
you can contribute into this plan $56,000.
Now it needs to come between a combination
of your company and you.
So in this particular case here
at what I've already contributed,
I've put 49, or er $19,000, I could have
another $37,000 rolled into the employer bucket
right up here.
My company can actually make that contribution for me.
But the problem by doing that is that money
doesn't qualify for Roth treatment.
That money that goes in there is gonna grow for you
for your retirement and when you pull the money out,
you're gonna be taxed on that money that went in,
plus all the growth on it.
Well so here's what you want to do.
You don't want your company makin' that contribution
for you, 'cause it's your company.
If you wanna get to your million dollars,
you need to make that contribution.
So you take and make a $37,000 contribution
to your after-tax employee bucket.
You've gotta have this set up in your plan
or this does not work.
So you make that contribution, so now you're at the limit
of the 56K overall contributions for your plan,
you've put in $37,000 here, you've put in $19,000 over here.
Okay, so we got $57,000 in the plan.
Now this after-tax bucket, let me explain how that works.
With the after-tax bucket, when you put money in,
if you just left it there and let it continue to grow
for the next 10 years,
and the bucket grows from 37,000 to 100,000 bucks,
when you pull that money out,
you're only gonna pay tax on the gain portion.
You'll get back your $37,000 'cause you already
paid tax on that money.
But all the future appreciation that you make on that money,
the $63,000 that comes back to you
is gonna be taxable to you.
But you don't wanna leave it there.
'Cause if you leave it there,
you gotta pay tax on that growth.
So what you need to do is set up a self-directed
Roth over here.
I know I'm not a big fan of self-directed IRAs,
I got plenty of videos on that,
but this is one of those exceptions here.
Set up a self-directed IRA that is a Roth.
Now, if your plan is set up the right way
with the key features that allow you to move money
in and out at any time, unlike your employer's 401K plan
where they get you in and then they lock you down
and you can't ever pull money out.
Then what you're able to do,
is you can roll this Roth money into there,
so it's a Roth to Roth rollover, that's permissible.
But you know what else you can do?
You can take this $37,000 right here, this after-tax money,
and you can roll that into that IRA as well.
This is not a back door Roth,
which I hear a lot of people talk about.
This is a trap door Roth IRA that no one knows about.
Well, people do if they know where to look,
namely the IRS's website, you can find it on there
where they talk about how this strategy
is actually accepted.
If you have an after tax employee account and a Roth account
they're eligible to be rolled into an IRA.
So just think, in year one, I'm making good money
through my company, I'm able to put $56,000
into a Roth IRA.
And your neighbor's sitting over there on the porch
drinking his beer, droppin' in $6,000 a year.
You're already nine years ahead of him
as far as contributions are going towards getting to your
million dollar retirement.
At $56,000 a year, in basically 19 years
you'll have a million dollars.
And we don't have to project growth rates on there.
But if you want to overlay growth rates on there,
say you're gettin' 10% a year,
you'll probably be there in 10 years.
Or even if you get 14% return on your money,
you're gonna get there that much sooner.
Do you understand?
It's knowing how entities work.
And that's what I mean,
entities can help you achieve your goals
if you only use them the right way to allow them
to assist you to get to where you want to go.
I hope you understand a lot now about
how you can use a solo 401K.
If you'd like to learn more,
contact us for a strategy session.
We develop these types of plans with these special buckets
inside of them to help people achieve
what they're looking to achieve with their
real estate investing and financial planning.
My name's Clint Coons with Anderson Business Advisors,
and I look forward to catching you
at one of my upcoming three-day tax and asset protection
workshops for real estate investors.
(upbeat music)