There’s a way to become a TAX FREE millionaire. And it’s not a secret! It’s called the Roth IRA. Let me explain:

The ROTH IRA is a fantastic investment account that offers unrivaled tax advantages. Unlike your typical 401k or even the Traditional IRA, ROTH IRA contributions are after-tax money. So even though you cannot deduct your contributions come tax time, you will not have to pay taxes on any capital appreciation or dividends earned (assuming you wait the proper amount of time before withdrawing your earnings)! That’s a huge advantage when you consider how much wealth you can build utilizing time, compound interest, and consistent investing (all TAX FREE). And that’s all a Roth IRA is: an after-tax retirement account that offers tax free growth and dividends. Remember some of the most powerful investments are the ones you can describe in one sentence. For most, simple is better!

Because the Roth is so powerful, there are qualification limits based on income. Specifically, your Modified Adjusted Gross Income. This is a number the IRS likes using to determine if you qualify for certain tax deductions, credits, and accounts like a Roth. Fortunately, the upper income limit is quite high relative to the average American salary. If you qualify for full contribution, MAX IT OUT. You want as much money invested in a Roth as possible. The more you invest, the greater the tax savings come retirement. The contribution limits in 2022 are $6,000 for those under 50 and $7,000 for those 50 and older. Those are set to change in 2023 to $6,500 and $7,500 respectively.

But how will this make you a TAX FREE millionaire? Well, let’s make some assumptions: Let’s assume you qualify to make the full contribution of $6,000 from now until you retire in 40 years. And let’s assume you’re a smart investor and invest 100% in the S&P 500 (which has historically returned 10% compounded annually). By the time you retire, your account will be worth more than 2.6 MILLION DOLLARS! And not only will you have $2,600,000 at retirement, but that money will be TAX FREE! That is the power of the Roth.

Don’t overlook this fantastic way to save for retirement. You’ll regret it 40 years from if you do. 40 years seems like a long time to get rich, but time flies. The least you can do is take care of your future self that may or may not be where you expect.

Calculating Your Modified Adjusted Gross Income (MAGI):

Disclaimer:
This is not financial advice, nor am I acting in the capacity of a financial advisor. All statements, information, and opinions are for the purpose of entertainment.

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