- 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 aire.
I think that makes sense.
Hey friends, it's Jarrad from Debt Free Blueprint.
And in this video we're gonna 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 gonna 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.
So that's why I wanna make sure that you know
the in's and out's 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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just like this one, then hit that subscribe button
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if you want more personal finance and investing videos
just like this one.
Starting in 2019 the max amount of money
that you are able to invest in your Roth IRA
is $6000 per year.
Or $500 per month.
So if you're married, and you each earn an income
then each of your can invest up to $6000 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 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 $1000 each.
And didn't invest anymore 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 $1000 investment
is worth almost $15,000.
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 $2000.
They all had the same return
and they invested the exact same amount.
But the person who had been invested
in the market for 40 years,
as opposed to 10 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 of the taxes that you owe.
Now IRA stands for Individual Retirement Account.
It's another retirement investment account
that 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 that you can invest it
with after tax money only.
The nice thing about an IRA in general
is that the majority of people are able to invest in one.
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 of it like a bucket.
Within that bucket you could have all kinds
of different investments.
You could own shares of individual stocks
like Amazon, Apple, Tesla.
You could own different low cost index funds,
bonds, or even Reits.
Within this IRA bucket you could 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're putting into that bucket.
I'll give you an idea of 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 59 1/2.
This is a huge deal.
So if you invested $166 per month
into your Roth IRA every month for 30 years straight,
and you assumed a 7% return on your money,
then starting at the age of 59 1/2
you could withdraw that $188,000
and pay zero taxes on that money.
Yes you have that right.
That means that you could have that money deposited
into 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 have that money on hand for you.
One time I tried to withdraw $3000 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 1/2,
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 1/2 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 loop hole
for you to know about.
You can actually withdraw the money
you contributed to your Roth IRA
before 59 1/2 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 $3000 into your Roth IRA this year,
and you have gains from your investments
that increase your total investment to $3500
then you can withdraw $3000 at any point in time
without paying any penalties.
Now if you withdraw the whole $3500
then you would be paying penalties and 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 on 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 are 59 1/2.
It's a gift to help your future self out
so you don't 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
at any point in time throughout the year.
And you can do this through small or large increments,
as long as they total less than $6000.
For example you could invest all $6000 on January 1st.
You could invest $500 per month throughout the year.
Or you could invest all $6000 throughout the first
six months of the year.
Then not worry about it again
until you invest into your Roth IRA again the next year.
There's another loop hole 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 first of the year.
What catch up contributions allow you to do
is invest towards the previous year's IRA limit
which in 2018 was $5000,
up until tax time of the current year.
So you would have up until April 15th of 2019
to invest up to $5500 towards your 2018 IRA.
And you could still invest up to $6000
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 earn some sort of income.
If you are younger than the age of 18
or know someone who is younger than 18,
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 18
then please please please
help them out with opening an account.
You will literally change their life.
You wanna know how much you could change your life.
If you get a 16 year old to start investing $1000 per year
into a Roth IRA which comes out to about $83 per month,
then when they hit the age of 60,
they could have over $265,000 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 become a multi millionaire
and be set financially a lot sooner for a lot longer.
Back to you thought.
You are eligible to invest the full $6000
into your Roth as long as your income
is less than $193,000 if you are married,
filing jointly.
And less than $122,000 if you are 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 have 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, total stock market index funds,
like VTSAX 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 $6000 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,
can become a millionaire or even a $500,000 aire
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 $240,000 of your own money.
But your Roth IRA investment could be worth
almost $1.2 million of tax free money.
If you do the same thing for 30 years
you'd have invested $180,000 of your own tax free money
and your IRA account has the potential
to be worth over $566,000.
Over half a million dollars of tax free money
for you to take out and spend on who knows what.
Please open a Roth IRA and start funding it today
with as much as you possibly can up to the max.
I max out my Roth 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 are paying attention to the fees
that are involved with whichever investment that you choose
to go into that Roth IRA bucket for yourself.
Ask me any investment questions that 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 workbook.
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I'll see you in the next one friends.
Adios.