Without Question, The Greatest Investment Account Ever Designed

The Roth IRA is the greatest investment account of all time.

It’s so powerful that the government caps how much you can put in each year.

And yet, 90% of people don’t have one.

Here’s what you need to know about Roth IRAs and how to open one:

Roth IRAs are individual retirement accounts.

They’re called retirement accounts because they’re tax-advantaged.

But because they’re so powerful, you need to open them up yourself.

Here’s how to do that…

How to open a Roth IRA:

Roth IRAs aren’t options you get to opt in to like your 401k.

(Some employers offer Roth 401ks now, but that's a different conversation)

And opening up a Roth IRA is as easy as opening a bank account.

Especially if you use any of these brokerages:

• Fidelity

• Vanguard

• Betterment

• M1 Finance

• Charles Schwab

And some others.

Here's exactly how to open one:

Go to one of the online brokers above.

Follow the steps by providing the basic account opening and financial information.

Link your bank account to the Roth IRA.

Boom. There you go, you're ready to set up your contributions into the Roth.

How do Roth IRAs work?

Unlike your 401k where pre-tax money gets invested, the Roth IRA uses post-tax money.

This is money you already paid taxes on.

It’s basically the part of your paycheck that enters your bank account.

Here’s what this means…

Because you already paid taxes on the money, the government says you don’t have to pay taxes when you take it out.

So if your investments grow to $1,000,000 the entire amount will be tax-free.

But there’s a catch…

Roth IRAs come with a set of rules related to:

• Income

• Withdrawals

• Contributions

Let me break down each…

Income:

To contribute to a Roth IRA, you must have earned income.

Earned income is money you made from:

• Tips

• Salary

• Wages

• Commissions

• Net earnings (self-employment)

But that’s not all…

You can also make too much money.

Here’s what I mean…

Making too much money:

There are income limits for Roth IRA contributions.

Here’s a chart from the IRS that explains:

Notice you can contribute up to a “limit”

Here’s why that’s important…

Contribution limits:

For 2023 the maximum contribution to a Roth IRA is $6,500.

If you’re age 50 or older, you can contribute up to $7,500.

These amounts phase out the more money you make.

Refer to the chart above to see when that happens.

But there's more.

Even if you're over the income limits, you can still open a Roth using what's called the "Backdoor" method.

As long as you don't already have an existing Traditional IRA, you're good to go to open and invest in a Roth.

Even if you're over the income limits, you can still open a Roth using what's called the "Backdoor" method.

As long as you don't already have an existing Traditional IRA, you're good to go to open and invest in a Roth.

Withdrawals:

There are some other limitations to Roth IRAs too regarding when you can take your money out.

For your money to be tax-free, you must wait until your account is at least 5 years old and you’re age 59 ½.

Here’s what happens if you withdraw early…

Early withdrawal penalties:

If you withdraw from a Roth IRA before age 59 ½ and/or before the account is 5 years old you must pay a 10% penalty + income taxes on the withdrawal.

But does this mean you can’t withdraw ANY money at all?

No.

There are exceptions…

Withdrawal exceptions:

You can withdraw Roth IRA contributions at any time.

Meaning you can withdraw up to the total amount of deposits you’ve made.

Penalties and taxes come into play when you withdraw earnings (the growth above your deposits).

But that’s not all.

There are more exceptions...

These exceptions only apply to the 10% penalty, not the income taxes on the early withdrawal.

Here’s a list from the IRS:

But despite all the rules, the Roth IRA is still the easiest way for you to retire a tax-free millionaire.

Here’s how:

Invest $540 a month for 30 years and you’ll have $1.1 million free and clear.

That’s the power of the Roth IRA.

And there you have it!

One of the most underrated investment accounts of all time…

The Roth IRA.