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$6,000 tax-free Millionaire: Roth IRA Explained - YouTube
Channel: Jarrad Morrow
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what if I told you that you could become
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a millionaire by taking this one piece
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of advice and worst case scenario you
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become a 500,000 heir I think that makes
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sense hey friends its Jared from
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debt-free blueprint and in this video
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we're going to be talking about what a
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Roth IRA is why you need one and how
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it's possible to become a millionaire by
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investing in one this is probably going
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to be one of the most important videos
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that you watch for learning how to truly
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become wealthy without paying taxes so
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Hulk smash that thumbs up button so we
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can make sure that other people know
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about this I so wish that someone would
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have given me this advice when I was
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younger but they didn't so that's why I
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want to make sure that you know the ins
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and outs of this whole thing so that you
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can become a millionaire a lot easier
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than me leave a comment down below
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letting me know your thoughts on
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investing in a Roth IRA if you want more
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personal finance videos just like this
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one then hit that subscribe button and
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the notification bell so YouTube knows
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to deliver them to you there's also
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links to playlist in the description if
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you want more personal finance and
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investing videos just like this one
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starting in 2019 the max amount of money
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that you were able to invest in your
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Roth IRA is six thousand dollars per
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year or five hundred dollars per month
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so if you're married and you each earn
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an income then each of you can invest up
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to six thousand dollars starting this
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year the sooner you invest in a Roth IRA
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the better after you watch this video I
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highly recommend setting up an account
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and funding funding it as soon as
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possible for one main reason and that's
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time time invested is so important the
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longer your money is in the market the
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more time your money has to grow through
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compound interest just so you know how
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important time is let's say person a B C
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and D all invest $1,000 each and didn't
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invest any more money between now and
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the age of 60 the only difference
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between any of them is their age and the
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amount of time that they had their money
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invested person a is 20 years old so
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after 40 years his $1,000 investment is
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worth almost fifteen thousand dollars
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now let's move down to person D they are
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50 years old so after 10 years their
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money has the potential to only be worth
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a little less than $2,000 they all have
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the same return and they invested the
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exact same amount but the person who had
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been invested in the mortgage
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forty years as opposed to ten years has
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almost eight times the amount I know
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it's absolutely insane so please take a
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minute to pick your jaw up off the
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ground once again the only difference is
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the amount of time that their money is
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sitting in the market taking advantage
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of compound interest and reinvesting
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their dividends when you hear the word
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Roth that basically means after-tax
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money that's the money that you actually
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receive in your bank account from your
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employer after they've taken out all the
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taxes that you owe
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now I array stands for individual
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retirement account
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it's another retirement investment
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account you can invest in outside of
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your retirement accounts like a 401k or
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403b put those two words together and
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you have yourself a Roth IRA a
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retirement account you can invest in
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with after-tax money only the nice thing
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about an IRA in general is that the
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majority of people are able to invest in
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the downside is that it's self-directed
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so most people don't even think about
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investing in one because they either
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didn't even think about it or they're
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too worried because they don't know how
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to do it hit that subscribe button
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because I have more videos coming out to
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help you out with this sort of thing one
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easy mistake that a lot of people make
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when thinking through what a Roth IRA is
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is that they think that they just need
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to invest in a Roth IRA and that they're
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completely done but an IRA isn't an
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actual investment think you put like a
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bucket with in that bucket you could
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have all kinds of different investments
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you could own share some individual
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stocks like Amazon Apple Tesla you could
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own different low-cost index funds bonds
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or even REITs
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within this IRA bucket you can also
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trade in and out of these stocks and
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funds without paying capital gains so
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when we're talking about a Roth IRA
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we're talking about the actual bucket
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itself not necessarily what type of
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investments you were putting into that
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bucket I'll give you an idea of how some
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of my IRA money is invested later in
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this video an amazing thing about the
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Roth IRA is that because you are
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investing with money that has already
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been taxed today your money will be able
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to grow and with be withdrawn tax-free
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once you hit the age of fifty nine and a
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half this is a huge deal so if you
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invested a hundred and sixty six dollars
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per month into your Roth IRA every month
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for thirty years straight and you
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assumed a seven percent return on your
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money then starting at the age of
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59 and a half you could withdraw that
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$188,000 and pays zero taxes on that
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money yes you have that right that means
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you have that money deposited in your
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bank account and you could walk right up
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to the counter and withdraw all of that
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money at once you'd actually have to
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call ahead to make sure that they had
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that money on hand for you one time I
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tried to withdraw $3,000 in $1 bills and
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I had to order the money ahead of time
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so they had it ready yes they thought I
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was going to a strip club
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but that was not my plan I promise since
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this is a retirement account with money
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that's supposed to be used once you hit
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59 and a half if you try to withdraw
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that money before that age then you'll
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be charged high penalties but there's a
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catch when you hear that you can't
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withdraw your money until 59 and a half
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without paying penalties you may freak
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out but I want you to hold on for a
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minute because there is a little bit of
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a loophole for you to know about you can
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actually withdraw the money you
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contributed to your Roth IRA before
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fifty nine and a half without paying any
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kind of penalties as long as you don't
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withdraw any of the gains from the
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account then you're good to go
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so if you invest $3,000 into your Roth
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IRA this year and you have gains from
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your investments that increase your
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total investment to $3500 then you can
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withdraw $3,000 at any point in time
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without paying and of any penalties now
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if you withdraw the whole $3500 then you
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would be paying penalties in taxes on
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that $500 gain that you made technically
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you could treat your Roth IRA like a
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mini savings account since you're able
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to withdraw the contributions tax-free
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but I highly highly recommend not
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looking at it like this at all if you do
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anything to remove any of the money from
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your Roth IRA account even if it's only
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your contributions like we just talked
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about then you're losing out in the
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benefits of time in the market and we
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already know how important maximizing
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that time can be for you just pretend in
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your head like all of this money you
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cannot touch until you're 59 and a half
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it's a gift to help your future self out
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so you have to work until the day that
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you die
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keep your emergency fund savings
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separate in a place like a high-yield
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online savings account and leave this
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IRA alone if you possibly can you can
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invest money into your Roth IRA any
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point in time throughout the year and
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you could do this through small or large
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increments as long as they total less
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than six thousand dollars for example
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you can invest all six thousand dollars
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on January 1st you could invest $500 per
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month throughout the year or you can
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invest all six thousand dollars
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throughout the first six months of the
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year then not worry about it again until
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you invest in into your Roth IRA again
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the next year there's another loophole
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though there's something called a
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catch-up contribution when it comes to
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your Roth IRA say it's January 1st 2019
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and you realize that you forgot to
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deposit any money into your IRA in 2018
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or you were waiting to receive some sort
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of a bonus on the 1st of the year what
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catch-up contributions allow you to do
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is invest towards the previous year's
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IRA limit which in 2018 it was $5000 up
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until tax time of the current year so
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you would have up until April 15th of
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2019 to invest up to $5,500 towards your
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2018 IRA and you could still invest up
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to $6,000 for your 2019 IRA I actually
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took advantage of this catch-up
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contribution once I had my debts paid
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off and started investing more money
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into my IRA it was extremely helpful for
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me since I wanted to start building
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wealth as soon as possible anyone with
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taxable income is able to invest in a
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Roth IRA as long as you were in some
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sort of income if you were younger than
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the age of eighteen or know someone who
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is younger than eighteen then they're
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able to contribute to a Roth IRA as well
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but they just need their parents to help
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them open an account as long as that
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person is earning some sort of income
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then they're good to go if you know
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someone under the age of eighteen then
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please please please help them out with
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opening an account you will literally
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change their life you want to know how
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much you could change your life if you
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get a 16 year old to start investing
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$1,000 per year into a Roth IRA which
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comes out to about 83 dollars per month
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then when they hit the age of 60 they
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could have over two hundred and
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sixty-five thousand dollars in their
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Roth IRA you would be the coolest person
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they'd ever meet don't worry folks my
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battery died we're good to go
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ideally they'd be investing more than
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that as they got older so they would
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actually be
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a multi-millionaire and beset
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financially a lot sooner for a lot
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longer back to you though you were
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eligible to invest the full six thousand
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dollars into your Roth as long as your
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income is less than one hundred ninety
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three thousand dollars if you're a
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married filing jointly and less than one
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hundred twenty two thousand dollars if
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you were single or married filing
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separately there's all kinds of
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companies out there to open an IRA with
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places like fidelity Charles Schwab
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Vanguard betterment and m1 finance
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remember that the IRA is just a bucket
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that you put your different investments
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into think of these companies as who is
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holding that bucket for you you can
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actually have multiple companies hold
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IRA buckets for you at once which
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platform you choose to invest through is
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all going to depend on your initial
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level of knowledge I personally invest
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my IRA through Vanguard and I've started
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to use betterment and m1 finance as well
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they're simple and I like their
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investment options I have the majority
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of my IRA investments in low-cost stock
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market Odle stock market index funds
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like VTS ax and VTI for lots of
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different reasons let me know in the
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comments down below if you want me to
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get into more detail when it comes to
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this sort of thing this year I'll be
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splitting my $6,000 IRA investment
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between Vanguard betterment and I'll be
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using m1 finance as well I'll make a
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video about all of those at some point
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in the future if you're interested in
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any of those investment platforms and
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I'll throw links in the description for
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you so are you ready to find out how you
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can become a millionaire or even a
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500,000 heir by investing in your Roth
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IRA this goes back to how important time
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is when it comes to being invested if
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you max out your IRA for 40 years and
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assume a 7% return which is a very safe
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assumption
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you will have invested two hundred and
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forty thousand dollars of your own money
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but your Roth IRA investment could be
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worth almost 1.2 million dollars of
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tax-free money if you do the same thing
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for 30 years
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you'd have invested a hundred and eighty
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thousand dollars of your own tax-free
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money and your IRA account has the
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potential to be worth over five hundred
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and sixty-six thousand dollars over half
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a million dollars of tax-free money for
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you to take out and spend on who knows
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what please open a Roth
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Reince are funding it today with as much
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as you possibly can up to the max imax
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on my my Groth IRA every single year
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because I know how important it is to my
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financial future do it even if you can
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only invest a few hundred or a few
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thousand dollars this year it doesn't
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matter where you go to open an account
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just make sure that you're paying
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attention to the fees that are involved
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with whichever investment that you
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choose to go into that Roth IRA bucket
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for yourself asking me any investment
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questions you have down below in the
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comments and I will answer them all for
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you or maybe make a video for you make
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sure to smash that thumbs up button and
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pick up your free copy of the debt free
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prep work both hit that subscribe button
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and the notification bell to get more
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personal finance videos just like this
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so we can start getting you to a point
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where you are financially free I'll see
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you in the next one friends adios
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