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$800,000 Roth IRA Starting With $1 - YouTube
Channel: Jarrad Morrow
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what's up money nerds i know that you're
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just like me and that we both have
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zero interest in working for the rest of
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our lives
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we're basically the same person yes
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you're correct we just became best
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friends
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what did we just become best friends yep
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but please i beg you
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do not show up in my house i personally
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want to be able to dip out of the
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workforce at a reasonable age
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grab my dog hop in a van do some hiking
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do some camping maybe eat some mushroom
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sandwiches possibly a handful of dirt
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and i know that you have an image in
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your head of what your life is going to
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look like
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once you can actually quit that
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soul-sucking job of yours but for us to
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get to that point
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we have to get our money situation
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covered so that we can afford that
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particular lifestyle i know it sounds
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like a daunting task but it's really not
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as difficult as you think it is
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and the reason for that is because you
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have access to one of the best kinds of
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money printers out there it's called
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wait for it a roth ira but who am i
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kidding you already knew that from the
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title of this video this is one of those
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things that you should be investing in
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even if you already have another
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investment account like a 401k
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403 b 457 taxable investment account or
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an
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hsa there's so many of them and in most
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cases you should be in you should be
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investing in a roth ira
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even before putting money into any of
[76]
those if you aren't then you're making a
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huge mistake and i'll cover why that is
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later in the video what you really came
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here for is to find out how if starting
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today
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you can easily build up anywhere between
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an eight hundred thousand dollar
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and one million dollar roth ira
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portfolio
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with very little effort so that you are
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eventually able to quit your job a lot
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faster
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than most of the people around you i'll
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show you how to do that and touch on
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everything else you need to know about a
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roth ira if you have any questions
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throughout this video please leave them
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down in the comments below and i will
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answer
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every single one of them for you the
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name roth ira sounds like a
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secret government agency that operates
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in the shadows of society but all a roth
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ira is
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is a type of investment account it's
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specifically for retirement investing
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that has some added benefits that can
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help make your money grow
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a whole heck of a lot easier now the ira
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portion of the name stands for
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individual retirement account the word
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roth essentially tells you that you
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won't ever have to pay taxes on the
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gains that you see within the account
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once money is deposited into it so if
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you put two thousand dollars into your
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roth ira this year and invest the money
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within the account
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then in 35 years at a seven percent
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average return
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the account will have grown to over
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twenty one thousand dollars
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and you'll never have to pay taxes on
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that nineteen thousand dollar gain or
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two thousand dollar contribution when
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you go to withdraw it
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for the rest of your life that's because
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the money that you put into the account
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has already been taxed by the government
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when your employer paid you
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it's what we call post tax money or
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sometimes referred to as net pay by
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doing this you're essentially making a
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deal with the government or the irs
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you're saying hey you can tax this money
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that i put into my roth ira right now
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but you have to promise to never make me
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pay taxes on this money or on any of the
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money in this account
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ever again an easy way to think about it
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is tax going in
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grows tax-free even the dividends and
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not
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taxed when money is withdrawn from the
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account after the age of 59 and a half
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technically you can withdraw some of the
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money before 59.5 but we'll cover that
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in just a minute this is one of the ways
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that a roth ira
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is different and way more powerful than
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something like a taxable investment
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account
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with a taxable investment account the
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money that you put into it
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has already been taxed by your employer
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then when you go to withdraw
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any money from the account if you had
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any gains then you'd be taxed
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on those gains for example using the
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same numbers as the roth ira example a
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minute ago
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if you contributed two thousand dollars
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to a taxable investment account
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and after 30 years the account grew to
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21 000
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then you'd have investment gains of 19
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000
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because 21 000 minus two thousand dollar
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your two thousand dollar contribution
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equals wait for it
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nineteen thousand dollars hashtag math
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in a taxable investment account you'd
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pay long term capital gains tax
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on that 19 000 profit but with the roth
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ira you'd pay
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zero dollars in taxes on that same
[249]
profit that's not to say that you should
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never invest money into a taxable
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investment account
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but you'd want to first max out
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something like your roth ira
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before investing any money into a
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taxable investment account because of
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the tax benefits
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when i say max out your roth ira there's
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a limit to how much you can contribute
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to this type of investment account
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every year and it's going to be based on
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your income and age
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the government is going to let you skip
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out on paying taxes but they want to
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limit how much of those taxes that
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you're actually going to skip out on
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starting in 2021 you can contribute up
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to 6 000
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per year if you're 49 or younger and 7
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000
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per year for people who are 50 and older
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if someone is below the age of 18 then
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they're actually able to contribute to a
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roth ira as long as a parent helps them
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open an account
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and they have some sort of taxable
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income they're usually referred to as a
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custodial account or custodial ira
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this is a great way to help younger
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people get on the path to start
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investing as early as possible we'll
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talk about where to open a roth ira
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shortly so hang tight if you could do me
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a huge favor and hulk smash
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that thumbs up button i would greatly
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appreciate it help support myself
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molly and my future child that actually
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doesn't exist at this point in time so
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thank you so much your income does play
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a part in whether or not you can
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contribute to a roth ira though
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single filers can contribute the full
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six thousand dollars per year
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if your modified adjusted gross income
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for that year
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is less than 125 000 and for married
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filing jointly
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your income has to be less than ninety
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eight thousand dollars for that year
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that you contribute
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that's six thousand dollars keep in mind
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if you're married filing jointly then
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each of you can contribute
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six thousand dollars per year which
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comes out to a total of twelve thousand
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dollars per year if your income is above
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either of those numbers for the year
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then the amount that you can contribute
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starts to phase out until you hit a
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certain income limit to where they won't
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allow you to contribute money directly
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to a roth ira for singles it's an income
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of 140 000
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or more and for married filing jointly
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it's 208
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000 or more but if you're above those
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income limits today or as time goes on
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and you make more money
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you end up above those income limits
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then you can technically still
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contribute to a roth ira
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but just not directly it's a little roth
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ira loophole
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called a backdoor roth ira i won't go
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into a ton of detail on how to do it
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here
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but at a high level it's basically where
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you contribute money to a traditional
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ira
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then transfer that money to a roth ira
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before you actually invest it in that
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traditional ira
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and you have to do this before the end
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of the year as well whichever investment
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platform that you use can help you
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through this whole process if you get to
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that point keep in mind that there is a
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few rules when it comes to a backdoor
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roth
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ira so make sure that you fully
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understand all of those rules
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before attempting to do it or contact an
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accountant for their help
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now if you want me to make a full video
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specifically on how to do this
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then let me know down in the comments
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below because you're going to be putting
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money
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into your roth ira it's important to
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know when you're actually able to access
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that money without getting in trouble by
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the government at the age of 59 and a
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half
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is when you'll have access to the total
[431]
amount of money within the account
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if you try to take out all of the money
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before that then you'll pay penalties on
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that money this is really not smart
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please avoid this at all costs but you
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were actually able to take some of the
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money out of your account before the age
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of 59 and a half without paying any
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penalties the irs is going to allow you
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to withdraw the amount that you
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contribute
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whenever you want as long as you don't
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touch any of the investment gains within
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the account for example if you're
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someone who has been maxing out your
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roth ira with six
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thousand dollars per year for 10 years
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then your contributions would be equal
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to sixty thousand dollars now let's
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assume that over that time the balance
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of your account had increased
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to a hundred thousand dollars due to the
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return on your investments so we're
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sitting here with
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sixty thousand dollars in contributions
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and forty thousand dollars in investment
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gains you can
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at any time withdraw any of that sixty
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thousand dollars
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without paying early withdrawal
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penalties but you cannot touch
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any of those forty thousand dollar gains
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before the age of fifty nine and a half
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keep in mind though that once you take
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money
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out of the account you cannot put it
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back into the account so
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don't make this decision without really
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thinking it through but just know that
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it's an option my personal opinion is
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that i will never tap into the money in
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my roth ira until i'm at a point where
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i'm living off of my investments
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if i happen to get into a bind with my
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finances before then
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then i always have my emergency fund set
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aside as well as ways to earn income
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to help reduce the likelihood that i'll
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need to rely and tap
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into my roth ira money before then i'd
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like to encourage you to do the same
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because once you start pulling money out
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of the account
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you immediately interrupt the growth of
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your investments think of a roth ira
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like a tree that you're trying to grow
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if you're trying to get that tree to
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grow as big and tall as possible
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then you wouldn't start chopping off a
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portion of the tree as it was trying to
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grow would you yes it's still going to
[541]
grow but you're just slowing down the
[543]
process and unfortunately
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trees have forever to grow you don't
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live forever
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but i kind of wish that you did it's the
[550]
same idea with the roth ira
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every time you want to withdraw your
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contributions you have to sell some of
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your investments
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to get the cash out that'll of course
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interrupt the growth
[560]
of your overall account what looks like
[562]
a simple six thousand dollar withdrawal
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is actually withdrawal of double or
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triple that
[567]
because of the amount that it could have
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grown to if you would have just left it
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alone and left it invested in the
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account a fairly common mistake that i
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see a lot with anyone who has a roth ira
[576]
is that they don't invest the money
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within the account
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now once you deposit money into your
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roth ira you have to take the next
[583]
next steps of actually investing it so
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that it can grow over time
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remember what the name stands for
[589]
individual retirement account
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therefore the actual account isn't the
[593]
investment
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it's just a place where you put the
[596]
investments to allow them to grow
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tax-free think of a roth ira like a
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bucket
[600]
within that bucket you can put all kinds
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of investments that'll help your money
[604]
grow
[605]
although you can just leave cash in that
[607]
bucket you can also place things inside
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of it like
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individual stocks reits target date
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funds
[613]
index funds bonds and things like that
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that'll grow
[616]
over time i'll show you my roth ira in a
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minute to give you an idea of the
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investments that i hold but keep in mind
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that the point of the roth ira
[623]
is to give you the opportunity to grow
[625]
your money tax-free
[627]
so you want to try to get that money
[628]
invested as quickly as possible
[630]
and also keep that money invested for as
[632]
long as possible have you ever gone to
[634]
the grocery store and walked down the
[636]
toilet paper aisle i promise this
[638]
question is going somewhere the amount
[639]
of different brands and types of toilet
[641]
paper options is
[642]
absolutely insane it's kind of the same
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thing with where to open a roth ira
[646]
account there are so many different
[648]
options that it can get extremely
[650]
overwhelming we have the old school
[651]
brokerage account companies like
[653]
vanguard fidelity
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charles schwab td ameritrade and then we
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have a lot of the newer players in the
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game who are very technology driven and
[660]
really focused on improving the user
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interface
[663]
for us younger generations like m1
[665]
finance who is my go-to
[667]
wealthfront betterment and a ton more i
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don't think that you can go wrong with
[670]
any of the old-school companies to be
[672]
honest with you but like i said i
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personally prefer something like an m1
[675]
finance which one
[676]
is one of those newer platforms that has
[678]
really caught my attention since
[680]
i'm more of a low-cost index fund
[683]
long-term investor if you're already
[685]
familiar with one over the other then
[686]
stick with the one that you already know
[688]
but if you were not sure then to help
[689]
make your decision a whole lot easier
[691]
i created a whole investing platform
[694]
guide where i break down
[695]
everything that you need to know about
[697]
each one of these to help you decide
[698]
where to open up your roth ira now it's
[701]
completely free so i'll have a link down
[703]
in the description of this video
[704]
to pick it up if you want a copy here's
[706]
a quick look at my roth ira that i have
[708]
through m1 finance
[709]
i'm mainly an index fund investor with
[712]
95
[712]
of my money invested that way now my
[715]
investments are pretty lame to be honest
[717]
with you to the outside world but
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very effective be effective because i
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just invest in
[722]
one index fund that basically invests my
[725]
money in over
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3 600 different stocks one thing to note
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is that i have a very high risk
[730]
tolerance so
[731]
that's why all of my money is invested
[733]
in stocks and nothing in bonds at this
[735]
point in time i'll have links in the
[736]
description of this video if you want to
[738]
learn more about m1 finance or if you
[740]
want to learn more about
[741]
index fund investing as well please
[743]
don't mistake what i'm investing in as
[744]
investment advice your goals may be
[746]
completely different than mine so
[748]
just keep that in mind i have a ton of
[750]
friends family members and acquaintances
[753]
in my life who don't contribute to their
[755]
roth ira
[756]
every single year trust me i'm that
[758]
annoying person
[759]
who always who's always asking hey have
[762]
you opened a roth ira yet hey have you
[764]
opened a roth ira yet
[766]
but i only do it because i want everyone
[768]
around me to be very
[770]
very wealthy one day a lot of their
[771]
reasoning is because they tell me that
[773]
they already put money into their 401k
[776]
403 b 457 or taxable investment accounts
[779]
so
[780]
why bother contributing to a roth ira on
[782]
top of all that one of the main reasons
[784]
that a roth ira should be fully maxed
[786]
out before maxing out any of those other
[788]
accounts
[789]
is because you have the most control
[791]
over a roth ira
[792]
and if i know you which you know that i
[795]
know you
[796]
you're all a bunch of control freaks so
[799]
this should get you all hot and bothered
[801]
just hearing that because it's a
[802]
self-directed account you make all of
[804]
the decisions
[805]
when it comes to the what where and how
[807]
first you have full control over where
[809]
you open a roth ira
[811]
when it comes to something like a 401k
[813]
your employer chooses who the retirement
[815]
plan provider is
[817]
now if you're not a big fan of the
[818]
features that they offer or the fees
[820]
that they charge
[821]
then there's nothing that you can do
[822]
about it you just have to suck it up and
[824]
deal with it for example my employer
[826]
uses a company called empower
[828]
empower retirement i think it is now if
[830]
for some reason i absolutely hated the
[832]
company
[833]
and didn't want to work with them then
[835]
that would mean that i just have to stop
[836]
contributing to my 401k
[838]
or constantly transfer money out of the
[841]
account with your roth ira
[843]
you get to choose whether you want to
[844]
use one of the more well-known
[845]
investment companies like
[847]
vanguard fidelity charles schwab or you
[850]
can choose to use one of the newer and
[851]
more modern investing platforms for your
[854]
roth ira
[854]
like m1 finance the second reason that
[856]
you should be maxing out your roth ira
[859]
every year
[859]
is because you have more options when it
[861]
comes to the types of things
[863]
that you can invest your money into as
[864]
much as i don't mind the company that
[866]
services my 401k through work
[868]
they sure do offer me some pretty trashy
[871]
investment options but with the roth ira
[873]
you have access to hundreds of more
[875]
options with the brokerages that i
[876]
mentioned
[877]
just a minute ago if you want to build
[878]
up an 800 000 roth ira then it's
[880]
actually a little bit easier than you
[882]
think it is
[883]
it just comes down to two things simple
[885]
math
[886]
and time if you maxed out your roth ira
[888]
which would be five hundred dollars per
[890]
month and assumed an average return
[892]
of seven percent per year then your
[894]
account would grow to eight hundred and
[895]
twenty nine thousand dollars of
[897]
tax-free money keep that in mind after
[899]
35 years
[900]
and of the 829 thousand dollars you
[903]
would have only had to have contributed
[905]
210 000 for it to grow to that large of
[909]
an amount i know 35 years sounds like a
[911]
long time
[912]
and i'd agree that it kind of is but
[914]
that's the power of investing with a
[916]
longer term
[916]
view as opposed to a shorter term get
[919]
rich quick view my numbers are also
[921]
assuming that you invest in something
[922]
like an s p
[923]
500 index fund or a total stock market
[926]
index fund
[927]
like the one that i showed you in my
[929]
roth ira so keep that in mind make sure
[931]
to hit that thumbs up button before you
[932]
go please and check out the description
[934]
of this video to get one free stock from
[936]
robinhood
[936]
worth up to 200 when you open an account
[939]
and deposit
[940]
money within 30 days down there you'll
[942]
also find more resources to help with
[944]
all of your personal finance investing
[946]
and financial independence needs as well
[948]
i'll see in the next one friends
[950]
done
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