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Roth IRA Millionaire 馃捀馃槑: How to Get Tax-Free Money Explained (2018) - YouTube
Channel: Wealth Hacker - Jeff Rose
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deal with better than becoming a
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millionaire it's paying zero taxes on
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that a million bucks because you know
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what taxes are not fun tax is not all
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about you but I don't really enjoy
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paying taxes if you're one of those
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people then why are you here like go
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somewhere else go go go away but
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seriously having a million dollars where
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you're paying zero taxes on that money
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that's an amazing feeling
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[Music]
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and what the best way that you can get
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there is using one of my favorite tools
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which is the Roth IRA where does this
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Roth IRA we're gonna find out more today
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[Music]
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what's going on Party People jeff rose
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goodfinancialcents.com what is all about
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and how do you get tax-free money well
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let's talk about that now so when it
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comes to saving for retirement you have
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a few different options so most people
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will take advantage of the 401k or a
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traditional IRA and these are great
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they're just a little old-school right I
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mean they still work they can still work
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but the Roth IRA can be so much better
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so here's how these works so if you're
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putting money into a 401k or a
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traditional IRA all the money that
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you're putting into it is pre-tax so you
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get a nice tax deduction the money then
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grows taxed at first you're not paying
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any money on any interest or earnings or
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dividends that you make off those
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investments but then that retirement we
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start pulling that money out that's when
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you pay tax so that's how the 401k and
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the traditional IRA works so how is the
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raw fairy different how is it better so
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with the Roth IRA you don't get any
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pre-tax deduction so anything that you
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put into it is after-tax and the way I
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like to think about that is if you're
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making a payment like a car payment or
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insurance payment that's all after-tax
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right like you don't get any tax
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deductions for those so the money you
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pay into the Roth is all after-tax so no
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tax break then it still grows
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tax-deferred like the traditional 401k
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and the traditional IRA but then at
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retirement when you pull that money out
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zero taxes are to be paid zero no taxes
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and that's huge on so many levels and
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that's why I love about talking about
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the Roth IRA so anytime I'm talking to a
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younger person I want them to start
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investing into a Roth IRA because you
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have so much time to take advantage of
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compounding interest so I love talking
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to younger investors and getting them
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started in this
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yeah I got the gray hairs but I'm still
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young I'm still young I'm fit okay you
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see at this point people are starting to
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get it a little bit when it comes to
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Roth battery they like the idea of
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taking it to Uncle Sam and not paying
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any income tax but it's so hard to
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comprehend exactly how it works so let's
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look at a real-life example let's say
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that you're making $50,000 and you can
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put away $5,000 for retirement if we're
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taking a batch of a 401 K or a
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traditional IRA we won't add up that
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$5,000 from the 50,000 so you're only
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gonna pay taxes on $45,000 so that's a
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nice tax break on paying forty five
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thousand when you made 50 that's not too
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bad I'll take it but how does it get
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better how does it get better with the
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Roth IRA so in the same example you're
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making fifty thousand dollars and you're
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putting five thousand dollars into the
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Roth IRA you don't get any tax break for
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that five thousand dollars so you still
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have to pay tax on the 50 thousand it's
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still gonna grow tax-deferred it's when
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you pull that money out that it's
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tax-free at this point you're probably
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wondering wait what I heard that I'm
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saving some taxes here with V 401 K and
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the other IRA but I'm not getting a tax
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break with the Roth what's the song I
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don't get it help me understand Jeff
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help me
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so let's fast-forward this a bit the
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$5,000 is now growing and it's
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compounding over time and now it's worth
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$50,000 if that $50,000 is inside a 401
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K or a traditional IRA you're gonna pay
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anywhere between 20 to 25% tax or more
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on that money so we're talking about ten
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thousand to twelve thousand five hundred
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and taxes that you have to give away to
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the IRS just give it just take it take
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it others I want it and this is how the
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Roth IRA gets better so the $50,000 that
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you didn't get a tax break on before but
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now when you pull that money out it is
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completely and 100% tax-free read my
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lips
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tax freeze tax-free and that my friend
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is why I love the Roth IRA so a common
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question I will usually get at this
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point time is well how much does the
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Roth IRA make or how much does it pay
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how much interest does it pay so the one
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thing it to realize about a Roth IRA it
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is not an investment so you're not
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a Roth IRA all of Roth IRA is it's an
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account type or as I like to say in an
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investment vehicle and then you decide
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what passengers go inside that vehicle
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for example you can buy a mutual fund
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and put that into a Roth IRA you could
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buy an individual stock you could buy an
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ETF there are a lot of different
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investments that you can in place inside
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that Roth IRA usually when I've hurt
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somebody or they ask me how much
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interest doesn't pay they've gone to a
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bank and they want to open a Roth IRA in
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a bank well a bank is typically only to
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offer you CDs or money market or savings
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accounts so they're just paying you a
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fixed interest rate and you can do that
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at a bank but it's not the Roth IRA
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that's paying interest it's the CD
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inside that Roth IRA that is alright for
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many when I shared that $50,000 example
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and show how they can say ten thousand
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or twelve thousand five hundred taxes
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that gives them excited but it we're
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still not quite there we need to see
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truly how powerful the Roth IRA is
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especially if we have twenty thirty
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years to look forward to so let's first
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answer this question you know how much
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can you put into a Roth IRA right now
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you can put in up to $5,500 per year if
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you're over the age of 50 you can put
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into $6,500
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since most of you watching this are
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probably under the age of 50 5500 per
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year is what you can put in so if we
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break that out per month that is four
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hundred and fifty eight dollars and 33
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cents you can put in per month or just
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over fifteen dollars per day inside the
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Roth IRA so let's say that you're a high
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achiever your action taker and you're
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watching this video and you go open a
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Roth IRA today and you started maxing
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out the Roth IRA where you're putting in
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four hundred fifty eight dollars a month
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and you did that for thirty years any
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average 10% return you would have over a
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million dollars inside that Roth IRA and
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what makes it even better which I talked
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about at the beginning this video is
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that that a million dollars gets how
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much taxes you're paying nothing it's
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tax-free or if you had that money in a
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401k or a traditional IRA you be paying
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anywhere from two hundred to two hundred
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and fifty thousand dollars in taxes as
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you take that money up so which would
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you rather have a million dollars
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tax-free or eight hundred thousand that
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you gave two hundred thousand to the IRS
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answer that one so that's why I love
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talking about the Roth IRA especially
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for younger people now if you don't have
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$15 a day or four hundred fifty eight
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dollars a month that's okay you can get
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started investing with a lot smaller
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than that I talked about this in other
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videos but I start investing with as
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little as $25 a month into a mutual fund
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so it doesn't take having a timeline to
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get started but like I always say the
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key is to just get started if you don't
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know where to start or where to go open
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a Roth IRA you have so many places to go
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if you want to work locally you could go
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to a local bank now keep in mind that
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may only offer you CDs or money-market
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some makes may offer investments but
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most of them don't another option could
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be going to like a local brokerage firm
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there are tons of them out there just be
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careful what they're trying to sell you
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make sure that you trust them they're
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not trying just to sell you something to
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earn a commission make sure you
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understand what you're putting money
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into but guess what if you're a high
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achiever action taker that just likes to
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wear their pajamas all the time you
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don't like to leave your house maybe you
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need some more friends but it does the
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case you can open up a Roth IRA right
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now in your pajamas on your Katz right
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just like you it's not watching this
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video so there are playable online
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brokers that you can go to now one that
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I talk about a lot is betterment now why
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I like betterment because you don't have
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to choose the investments with
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betterment you just tell them what's
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your goal what you trying to accomplish
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like how much how long does this money
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need to sit there for so if it's for a
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retirement goal they're going to choose
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ETF's exchange-traded funds based off
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your wrist hogs and your timeline so
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there really is no thinking to it other
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than opening account and putting money
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into it but if you want to have more
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control on the actual investments you're
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putting your money into look at other
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options like Ally financial or TD
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Ameritrade or even going straight to a
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mutual fund companies like Vanguard or
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TV or provides more fidelity with all
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these options you're gonna have more
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control on the mutual funds ETFs at
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you're putting your money into but the
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key thing is to stop procrastinating
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because check this out for somebody that
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starts putting their money in at the age
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of 25 if they're putting a hundred
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dollars a month and they earn over ten
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percent interest they could accrue up to
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eight hundred to a million dollars at
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the time of retirement but somebody that
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waits 10 years and puts the exact same
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money in there
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going to have 700,000 less or more at
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retirement just by waiting 10 years to
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get started so stop procrastinating stop
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making excuses get started if you're
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interested in any of these online
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options check out in the description
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below I've got links to the different
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places I talk about I also have a blog
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post that talks about all the different
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places you can open the Roth IRA there
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are so many choices are a lot of options
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once again just pick one and get started
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it might not be the best one today but
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that's okay because you'll learn a lot
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to that process or I want to hear from
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you if you have a Roth IRA or if you
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think it's the coolest thing in the
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world let me know in the comment section
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below and if you haven't yet subscribed
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what are you waiting for come on let's
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go let's go thanks for tuning in this is
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jeff rose beautiful scents calm see you
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next time better got really hot in here
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score leave me a comment in the
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description know so I say leave a
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comment on YouTube
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you
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