This video we're going to talk about what a Roth IRA is how you can use it to become a tax-free
millionaire and some fatal mistakes
You need to make sure that you avoid when setting up your Roth IRA
Account now as a basic overview of what your Roth IRA is is it is an individual
retirement account where you can set aside up to
$5,500 every single year and then when you're fifty nine and a half
You can pull out that money plus the money that you've earned through compound interest
100%
Tax-free now the great thing about this is there's no minimum. So if you don't have
$5,500 to go through and invest into your Roth IRA every single year
you can put as much as as little as 100 even five hundred dollars every single year and
Still watch that money grow through the power of compound interest, which we'll talk about here in just a second
But Before we jump into that, let's talk about the differences between a Roth IRA and a traditional IRA right now
They're both retirement accounts where you can go through and each year put in money
So that you can go through and pull that out in your retirement
And so that money can help fund your retirement off of the compound interest and all those earnings
however with a traditional IRA
When you pull that money out
You're actually taxed on all of those earnings which when you're 59 and a half or in your 60s
Typically, you're in a higher income tax bracket as opposed to when you're in your 20s and 30s versus a Roth IRA
what you do is you go through and you invest this money in your 20s your 30s your 40s or however old you are and
Then once you pull it out, once you're 59 and a half
It's 100 percent
tax-free because the initial money that you put into the account was already taxed and since it was already taxed you're not have to be
Double tax when you pull it out now if you do need the money
Before you turn 59 and a half you can go through and pull it out
But there are some penalties and there's some stipulations going through and pulling it out
so typically when you go through and create your Roth IRA account
What you want to have in mind is that you're just putting that money away and you're not going to be touching that
Until you're well into your 60s or even in your 70s and it funds your timon
Now one of the key mistakes that most people make and if you're watching this video right now
I hope that you guys don't make this is that you want to start your Roth IRA account as soon as possible, right?
I'm gonna break down and show you guys an example of how powerful it is to start this account earlier
rather than later and even if you're a below 18
you can still start a Roth IRA account and just have your parent or guardian as a cosigner on the account and
even if you don't have fifty five hundred
dollars per year to go through and put into this account if you're going through let's say and mowing lawns is a side job in
high school you can be stocking away a hundred or two hundred or three hundred dollars every single year and
Watch that money grow with the power of compound interest now
Let's talk about a quick example of how powerful compound interest can be for you
With your auth IRA when it comes to retirement, right?
So let's just say you are an eighteen year old right now watching this video and you think okay
Well, I want to go through and start a Roth IRA
So you go and you start your Roth IRA and you don't have fifty five hundred
Dollars every single year to go through and invest which fifty five hundred
Dollars is about four hundred and fifty dollars every single month to go through and put in there
but let's say you have a
Thousand dollars per year that you can go through and invest into this account now if you break down a thousand dollars by day
It's is less than three dollars per day that you're stalking away
Into this Roth IRA that can grow with this compound interest that can benefit you hugely in your retirement
So going back to this example, let's say you're just eighteen years old you put $1,000 into your Roth IRA
every single year
Until you are 60 years old by the time you are sixty years old. You will have had this account open for 42 years
So eighteen to sixty alright, and if you're investing $1000 every single year you will have invested forty two thousand dollars total
Over the course of those 42 years now over those 42 years by the time you are sixty
It's actually fifty nine and a half but just for an easy example
I'm just saying 60 years old after those 42 years that
42 thousand dollars will have grown to two hundred and sixty three thousand
920 dollars that you can take out and use in your retirement
100% tax-free now, let's say you're maxing this out every single year you're starting when you're 18 years old and you're putting
$5,500 every single year which equates to about
fifteen dollars every single day
So let's say instead of going out every single day you go through and you say hey instead of going out to dinner
We're out to lunch. I'm gonna take this money and I'm gonna put it into my Roth IRA and that
$5,500 invested every single year from the time you're 18 to the time you're 60
That will be a total of two hundred and thirty one thousand dollars invested
but because of the power of compounding interest that
231 thousand dollars will it turn into one point four five million dollars?
so two hundred and thirty one thousand dollars invested is almost turned into one and a half million dollars of
Completely non taxable income that you can have and use in your retirement and that right there is the beauty of compound interest
Albert Einstein actually called compound interest the 8th wonder of the world and
Warren Buffett who many of you guys know is one of the wealthiest?
men in the world
he said that he attributes his wealth to a lot of luck and
Also compound interest so you can see right there the power of compound interest now
Let's compare this to let's say you don't start this until you're a little bit later in life
Let's say you're thirty years old just so you can see the stark contrast of starting a Roth IRA at the age of 18
Versus thirty both are very young but there's a 12 years difference. So let's say that same example, you're 30 years old and you're investing
$1,000 every single year
into your Roth IRA
By the time you are 60 years old by the time you can actually go through and pull that money out
And remember it is fifty nine and a half, but just to make this example easy
We're using the age of 60 so that will be 30 years or one thousand dollars every single year
That'll be thirty thousand dollars invested now by the time you can actually pull that money out that money will have turned into
108 thousand dollars now a little bit over one hundred eight thousand dollars, but you're almost four times
Eeen your money just with the power of comp interests over those 30 years
Now if you're 30 years old and you're just starting your Roth IRA more than likely you've got a stable job
You've got some income coming in so you can probably go through and you can probably max out your Roth IRA every single year at
$5,500 per year now if you do that
$5,500 per year over the course of 30 years you will have invested
165 thousand dollars over the course of that 30 years into your Roth IRA
but because of
Compounding interest you will have just shy of six hundred thousand dollars in
Your Roth IRA that you can have and use in your retirement. And remember the best part about this is this 100%
Tax-free because you are already taxed on the initial money that you put into your Roth IRA
so guys this is why I
stress so hard that you need to go through and set up your Roth IRA account and put in as much money as you possibly
Can every single year if you need to cut back on some?
luxury
Expenses that aren't really worth it to see that compound interest help grow that money
To benefit you in your retirement so you don't have to rely on your kids taking care of you then
This is the number one way to go through and do it now
You can go through it takes about 20 minutes to set up account. You can do it online. You can go into a branch
that's
Local nearby where you live and the number one recommendation I would have is just going through and setting up your Roth IRA
so you don't miss out on all of the growth that you can earn with your money by just
Compounding every single year now
I was telling you guys the very beginning of this video that I was going to tell you one of the fatal mistakes
that you do not want to make when you go through and set up your Roth IRA and this was actually
Very embarrassing but I made this mistake myself and actually after talking to a few friends
I found out that several other people had made this exact same mistake. Now what I first started my Roth IRA
I thought that a Roth IRA was like investing money into a stock or into a mutual fund
so I thought that this fifty five hundred dollars that I initially put in it was like investing fifty five hundred dollars into
Apple or Amazon or one of these different stocks or mutual funds?
however
The reality is which I didn't find this out until about eight months later when I was actually starting to dig into
What a Roth IRA is and how it works
I knew that I needed to create one because I had seen other YouTube videos or blog posts and so I was like I need
To create it get money in there
But then I realized that a Roth IRA is more like your checking or your savings account. So in all reality
What happens is you put money into that Roth IRA Roth IRA
and then the money just really sits there and if you don't put that money into some
Investment then what happens is you're getting the same return is if that money is just sitting in your savings account
Which with most banks is like point zero one percent
so with point zero one percent earnings every single year it is gonna take you a
Long long time even with compound interest to actually see that money grow
So once you go through you create that Roth IRA you fund it you put some money into it and then from here
Now you need to go through and invest this money into stocks mutual funds index funds whatever it is
and
The growth and the earnings on that money is where you see the growth and the compound interest actually start to happen and take place
And then any earnings on that stock growth?
You don't have to be taxed on when you're 60 years old later down the road now
There's probably a lot of you guys watching this right now and thinking well, duh. That's an obvious
Well, guess what that wasn't obvious to me and I know a lot of other people wasn't obvious to them
So if you're watching this video right now
I just want to make sure that that was clear for you as well
If you're kind of a newbie with this whole Roth IRA thing
Because what happens is if you just put money in there and it sits for eight months like you did with me
So I just want to break this down and explain this to you so you don't make those stupid mistakes
Like I did and I put this in and I had eight months. Luckily. It was only eight months
I had a friend who went through and put money into his Roth IRA and he let it sit for two
Years before he realized he had to actually go through and invest that money into some other stock or some other investment
To actually see that money grow now. I'm not a financial adviser
So I can't advise you on any stocks or mutual funds or in-depth at index funds or anything else to go through and put that
money into however
Most of the experts if you're just going through and you're not a day in a day out stock trader or anything like that
most experts will advise to put that money and low-cost index funds because
Instead of just investing all of your money into a stock like let's say Amazon
Let's say something crazy happened with Amazon
Tomorrow like something like that happened with Enron and then all of a sudden the company just craters and tanks
Well, you just lost all of your money whereas with index funds
It's like investing just a little bit of your money across all of the stocks in the stock
Market, and so you are a lot safer when you're going through and investing in low-cost index funds. So that's actually what I've done
I Maura the long term long game mindset with my Roth IRA and
Investing in low-cost index funds to see that money grow
Which you can typically Kees typically see about a six to eight percent return on your money annually
With these low-cost index funds. Alright guys, so just a quick recap of what we talked about today number one
make sure you go through and start your own Roth IRA if you have not yet if
You're putting this off for any reason just because it's so easy to do. It's very easy not to do as well
So I highly recommend just drop what you're doing right now. You have some free time because you're watching this video
Stop what you're doing go start up your own Roth IRA doesn't matter if you're a fifteen eighteen forty fifty wherever you're at in life
Start this so you can start compounding this money then step. Number two after you've got this created
Make sure you go through and actually put in as much money as you can every single year up to fifty five hundred
dollars now if you can't put in fifty five hundred dollars every single year, it doesn't matter but
remember, even if you're putting just one thousand dollars per year into your Roth IRA the effect of compounding that money can be
extremely beneficial for you
And then once that money is into your auth RA don't forget to invest that money into some type of fund whether it's a stock
Mutual fund index fund I highly recommend index funds because they are just low risk
They're gonna grow over time and this is kind of a low risk investment
Because if you're investing for your retirement you want to make sure that you have money in there
So you don't want to be throwing it all in Amazon or Apple or something like that and then a year from now?
Something happens it totally craters and then you just kind of are not really make anything on your money whereas with index funds
They're very safe. They're very reliable over the course of last decades. You can go through and do the research
They typically can make between 6 to 8%
annually on your money and
Compounding that money over the course of 30 or 40 years
It's amazing and I've shown you guys these examples earlier in this video. And then the fourth thing is just to be patient
Okay, don't go through and pull money out or you know
Make sure that you're only investing the money that you don't absolutely need to have on hand
because if you go through and you pull it out before 59 and a half
you are gonna be taxed you're gonna be having all these fines and
It's not the way that you want to do it you want to put the money in that you don't really care about seeing
until you're 60 or older because then this money has grown with compound interest and
You will thank me when you are in your retirement
So create the Roth IRA put in as much money as you can every single year
Invest that money into index funds and then be patient and just watch it grow over time. Don't be checking every week
Don't be checking every month
Don't be freaking out if the stock drops a little bit or the index one drops a little bit over the course of decades
Typically is gonna be that upward growth about six to eight percent
So anyway guys, thanks so much for watching this video if you want some more tips on how to grow your money
I've got my passive income checklist. I'm gonna throw down in the description. You guys can just opt-in there
I'm giving out to you guys 100% for free and I'm showing you how to grow your passive income from zero to your first
$1,000 every single month and if you think about that if you don't have any money go through and invest into your Roth IRA
this is a great way to start making some side extra income and then any of the income that you make
Through these passive income checklist that I'm showing you guys and teach you guys how to do
Then just put that money all into your Roth IRA and you can have that fun too Roth IRA
100% so if your check that you're making from your normal job or your employer you could just have that pay for your main
Expenses and you can have that for savings and emergency fund and everything else
You have the side passive income source. That's funding your whole retirement. All right
also
If you guys are brand new here the channel make sure you guys subscribe
And hit that notification bell because we launched new videos every single week teach you guys how to grow your business and make more money
Also, if you guys found this video helpful, go ahead give a thumbs up and also comment down below
Let me know what you guys thought let me know you what you guys are doing right now about your Roth IRA
when you started it and
What you're gonna do if you have not started it when you are you actually gonna start it and take action
Alright, so anyway guys, thanks so much for watching this video
Hope you guys subscribe like comment and I will talk to you guys in the next video