Roth IRA: The EASIEST Way To Become A MILLIONAIRE #Best Education Page #Online Earning

 So in this video we're gonna be talking

about the easiest way to become a millionaire,

and that is through the use of a tool called

the Roth IRA.

Now, I know a lot of you guys

are already familiar with this investment vehicle,

but I'm hoping for those of you

that are completely new to it

to explain to you guys how powerful this is

and why this is in my opinion the easiest way

to generate a massive amount of wealth for yourself.

But before I get into that,

I want to explain the concept here

of the fast lane path to becoming a millionaire

versus the slow lane path.

And I think a lot of people who watch these videos

about how to become a millionaire

are always looking for that fast lane path.

And, in my opinion, the fast lane path

for becoming a millionaire is starting your own business

or having some kind of investment in yourself,

and I have absolutely no problem with that.

I've invested in myself, I've started my own online business

and so I totally get that strategy

of the fast lane life and if that's something you want to do

you have the fast lane path to becoming a millionaire,

I think you should totally follow that path.

But if you are interested in a slower path

to becoming a millionaire, which is through long-term

investing, that is exactly what I'm going

to teach you in this
video.

So there are three different components here

involved with this process.

Number one is a fee free Roth IRA.

I'm gonna give you guys an option at the end here

of a fee free Roth IRA.

Number two, the second piece of this

is regular contributions to this account,

where you're contributing money on a weekly

or monthly or yearly basis.

And then number three is simply time,

allowing your money to have time to grow,

I'm sure a lot of us are familiar

with compound interest which is where you're able

to earn interest on your interest,

and that is how billionaires like Warren Buffet

have generated massive amounts of wealth for themselves,

is because of that compounding effect

and earning interest on the interest

that you've already earned.

So first of all let's go ahead and answer

the question here of what is a Roth IRA.

A Roth IRA is a type of IRA which is

an individual retirement account,

and most people confuse it with the 401(k).

They say, well, I already have a 401(k),

so why would I need this Roth IRA?

Well, the 401(k) is a an employer-sponsored

retirement plan, and not all people

are offered a 401(k) based on your job.

A lot of people in the service industry

are not offered 401(k)s because they are not

technically employed by anybody,

they're just getting paid for their services.

So not everybody has this option for a 401(k),

those things can be loaded with fees

and they may not actually be the best investment for you.

Now, with that 401(k) you are putting away money tax-free,

you're taking money that you haven't paid tax on

and you're shelling it into your 401(k)

and then when you've reached retirement age

and begin to draw from that account,

you're paying taxes down the road.

So it's basically like a tax-deferred account,

you're gonna pay taxes later when you're taking money out.

The Roth IRA, on the hand, is completely different.

with the Roth IRA, you're taking money,

you're taking your post-tax income,

money you've already paid taxes on,

putting it into this account,

but the beauty is that when you draw from this account

once you've reached retirement age,

you're paying no taxes on that.

So basically with the Roth IRA you're paying

a small amount of taxes now to avoid taxes later,

versus the 401(k) where you're avoiding

a small amount of tax today

and paying a large tax bill down the road.

Now the important thing to remember here

is that because this is an IRA,

this is retirement account,

it is meant for retirement savings,

and the age for withdrawal at this point is 59 1/2

for any earnings from the Roth IRA.

So basically any contributions you make

into a Roth IRA, you can withdraw

without paying any taxes or penalties,

but if you take out any of the earnings

from a Roth IRA, you're gonna pay taxes

as well as a penalty.

So if you decide to put money into a Roth IRA,

this isn't the kind of thing where you're gonna change

your mind two years from now and empty out that account,

otherwise you're going to pay taxes

and penalties on the earnings or the interest

that you earned from that account,

not the amount that you originally contributed.

And on the other hand, if you were to dip

into a 401(k) early, you're going to pay taxes

and you're gonna have a penalty

on any amount that you withdraw

because that's money that you haven't already paid taxes on.

So the amazing thing about the Roth IRA

is that it essentially allows you

to pay zero taxes on potentially decades

of compounding interest based on when you start.

A 20-year-old could basically have their money

compounding for the next 40 years,

earning interest on interest every single year,

paying absolutely no taxes on that income

through the use of the Roth IRA.

And a lot of people make this mistake

of investing through a taxable account

and they don't realize that you can direct a Roth IRA

and put whatever you want into that.

You can hold individual stocks, you can hold index funds,

it doesn't necessarily have to be just a mutual fund

that you're investing in through the Roth IRA,

all you are doing is making the decision

of I don't want to pay taxes on this income,

and so you are basically putting it

in that tax sheltered account

and growing that money for yourself later on in life.

So how much can you contribute to a Roth IRA?

Well, if you are under 50 years old,

you can contribute, as of the current tax laws,

$5,500 per year, and if you are 50 and up

they allow you to have a catch up period

where you can contribute another $1,000 on top of that

or $6,500 per year.

So now the burning question you have is,

how do you become a tax-free millionaire

following this strategy?

So let's say for example you contributed $5,500 per year,

you maxed out your Roth IRA contribution

from age 20 to age 60.

Now, I know a lot of people are gonna stop me right there

and say, where am I gonna get $5,500?

And the first thing I want to tell you

is a lot of people get a tax refund

at the end of the year, and for most people

that is anywhere from two to $3,000.

So if you committed to putting that into your Roth IRA

as opposed to spending it on a vacation

or just dumping it into your checking account

and God knows where it goes,

that could be a way that you find

a large amount of the money that's gonna go

into that Roth IRA is just by putting your tax refund aside

and allowing that money to grow tax-free.

But let's say you find a way to maximize your contribution

every year, at an 8% return,

which is basically the average return

from the stock market over the last 100 years,

well, over those 40 years,

you will have contributed $219,840,

but how much money have earned

through compound interest at that 8% return?

You've earned $1,203,934.63.

So your total there, after those 40 years

is just about 1.4 million dollars,

$1,423,774.63,

and how much did you pay in taxes?

Zero.

You didn't pay any money in taxes

because you already paid taxes

on the money that you contributed.

Now, let's compare that on the other hand

to somebody who followed the exact same strategy,

had the same contribution, the same 8% compounded return,

but they did this through a taxable account.

They will have to pay long-term capital gains tax

on that $1,203,934.63,

and based on the current tax laws,

for most people that's going to be a 15%

long-term capital gains tax rate.

They would have a tax bill of $180,590.19

so this is the price people pay

by making this mistake of not investing

through a Roth IRA and investing through a taxable account,

that right there could be a potentially $200,000 mistake

by not investing through a Roth IRA

and keeping yourself tax sheltered.

And this right here is a way that you can allow yourself

to become a tax-free millionaire

by maximizing your contributions to a Roth IRA each year.

Now, like anything out there,

there are some pros and cons to the Roth IRA,

so let's go ahead and talk about what those are now.

First of all, the pros, number one you can grow

your money tax-free because you're paying taxes

on the way in, that is the most desirable feature

of the Roth IRA for most people.

Number two, one of my favorite reasons

for looking at a Roth IRA, is that you can lock in

your tax today.

And a lot of people don't necessarily know what this means,

but do you think that taxes are going to be higher

in the future, the same, or lower?

If you think that taxes are going to be higher

in the future by any chance,

and based on our national debt

there is a good chance that taxes will be higher,

you can lock in that tax rate today

by paying taxes now and not paying taxes later.

Through the 401(k), you're waiting to pay taxes

in some cases 20, 30, or 40 years down the road

and you have absolutely no idea

what the tax structure is going to look like

at that point in time.

And then the third pro is the fact

that you can withdraw contributions penalty free,

so if anything happens down the road

and you need to pull out some money,

you can pull out your contributions

without paying a penalty and you've already paid taxes

on that money, versus money in a 401(k),

if you have to draw from that, you're going

to have to pay taxes and you're gonna have

to pay some kind of penalty, which I believe is around 10%.

It is a nasty bill, not something

that you want to have to do.

What are the cons of a Roth IRA?

Number one, you have to pay taxes up front,

and for some people, they like having their money

invested without paying taxes,

they'd rather pay that tax bill later.

Number two, the maximum contribution is low,

$5,500 per year, you're not gonna be able

to grow a Roth IRA to 10s or hundreds of millions of dollars

unless you're really good at investing that money

and allocating it.

And then number three, there are income limitations

with the Roth IRA.

If you make over a certain dollar amount

you are not allowed to open one,

but if you are in that situation

you need to look up something called

a backdoor Roth IRA,

through a conversion of a different type

of retirement account you can open a Roth IRA,

it's called the backdoor Roth,

check that one out on Google.

So that is how you can become a tax-free millionaire

through the use of a Roth IRA.

And as promised in the beginning,

I'm going to share with you guys what,

in my opinion, is a great option here

for a fee-free Roth IRA, and that is retirement accounts

offered through M1 Finance.

I'm gonna actually open it up and show you guys

exactly what that looks like,

but I did want to mention I'm going to include a link

for M1 Finance down below in the description.

It is an affiliate link, you guys don't have to use it

if you don't want to,

but understand that your use of that link

certainly helps me out and helps to support my channel

and allows me to spread more videos

and messages like this.

So, first of all, why do I like M1 Finance?

It is not because I'm an affiliate,

it has nothing to do with that.

I think it is a great platform,

especially for retirement accounts.

Number one, the first reason why

is that M1 finance doesn't charge you a penny.

There are zero fees associated with investing

through M1 Finance other than the fees

that you're going to pay if you invest

in some kind of ETF, and you're gonna pay those fees

regardless of the brokerage that you go through.

Number two, M1 Finance offers dozens

of professionally built portfolios,

and they offer you some level of guidance here

in terms of putting together a well diversified portfolio,

and I do not know of a single other

free brokerage account out there

that is offering this service to people without charging.

Number three, you can have complete automation

of your investment through M1 Finance.

So if you wanted to contribute $100 a week,

$100 a month, whatever dollar amount you want to contribute,

so you can set that on a schedule

and automatically be investing into your taxable account

or into your retirement account through M1 Finance.

Number four, very simple user interface,

it is one of the best user experiences

in my opinion of any brokerage company out there.

They have a really easy to follow app.

And then number five, the minimum to get started

with a retirement account is just $500,

so the barriers to entry are not very high.

So what I'm gonna do now is I'm gonna jump

into my phone here and I'm gonna show you guys

exactly what this looks like and how you can set up

a fee-free Roth IRA with M1 Finance.

So I'm gonna go ahead and show you guys

what these retirement portfolios look like.

I already have an account set up with M1 Finance,

so I can't show you guys that initial step,

but it's very easy, you're just gonna download the app,

click sign up, and then you're going

to select a Roth IRA, opening up a retirement account.

And once you go ahead and open that account,

that is when you can fund it and begin investing

in a portfolio.

So what I want to show you guys

is the retirement portfolios that are offered

through M1 Finance.

And that's what I'm gonna show you guys now

by creating a new pie.

So, what you're gonna do is you're gonna go over here

to expert pies and you can see specifically

they have a plan for retirement.

So these pies are ideal for those

who are planning their investing strategy around retirement,

focused on building wealth while young

and maintaining their portfolio later on

and desiring a portfolio that automatically updates

to align with their goals.

So totally automated portfolio.

So let's go ahead and click on that.

And then all you're going to do

is click right here and type in the year

or select the year that you plan on retiring.

So let's say in my case being about 25 years old,

I'm turning 24 soon, that would mean

I'm going to ideally retire in about 40 years

which would be around 2060.

So I would just select 2060,

and there are my options right there,

2060 conservative, moderate, and aggressive,

and those are all going to be based on your risk tolerance.

If you have a large tolerance for risk

and you don't mind if there is large fluctuations

within your portfolio, you might pick 2060 aggressive.

If you don't have a lot of risk tolerance,

you would pick conservative.

And if you're somewhere in the middle,

that would be the 2060 moderate portfolio.

All you would do is select that portfolio,

you can read more about it and begin investing

through M1 Finance.

So if you click on that specifically

you can get more information on this portfolio,

look at the return over the last one year, three years,

and five years, and see if this is a good selection for you.

But anyways guys, that's gonna wrap up this video,

this is an exact strategy of how you can become

a tax-free millionaire through the use of the Roth IRA

and you can invest in a Roth IRA fee free

through M1 Finance.

Like I said, I have a link in the description,

it's an affiliate link, if you guys decide to sign up.

But, again, you do not have to use that

if you don't want to.

But thank you guys so much for watching this video.

If you have any friends you want to share this with,

if they want to also become a tax-free millionaire,

feel free to share this with them as well.

But if not, make sure you guys hit that subscribe button,

leave me a comment, if you're following this strategy,

and I will see you in the next video.

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