3 Biggest Advantages of a Roth IRA
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When I was told this in my 20s – of course back in 2008 jobs were not in demand anywhere so income was survival. Glad I started it when I did though…
Hey I have a chunk of non-deductible IRA that I can’t do a backdoor Roth conversion on. Looking for help to move this to a Roth for my situation. Do you guys help clients in the Los Angeles/Orange County area?
I thought for sure that the fact that roth money does not go into the PROVISIONAL income calculation for the taxation of social security would be #3
Every time Bo says he is getting into the weeds, my ears perk up. That’s when he says the good stuff. Don’t hesitate to get into the weeds. That’s why the financial mutants are here!
The 3 advantages highlighted:
—Tax-free growth
—No RMD requirements
—SOS piggy bank.
Great questions, love the feedback, thank you so much
But can you please explain:
Roth 401k put in 5000/yr but you paid taxes on that at 30% so in total it would be total cost of 7150.00 with taxes paid (2150.00)
Traditional if I put in 7150 every year knowing I have to pay when I withdraw at sixty, what would be more powerful in the end result. I would imaging at 2150.00 extra every year would be a much bigger gain overall but would that difference even out when I retire at 60 and withdraw while paying income taxes on the withdraw for traditional 401k
For example
Year one
Roth 5000 vs Traditional 7150
Year two
Roth 10000 vs Traditional 14300
Etc
The only concern I have with roth is that congress will never let a pot of money go untaxed. I see them taxing the growth at least at capital gains rates in the future.
This channel is going hit 1M subs in no time.
The real drawback came a few years ago when the government made them liquidate my account that I was controlling & always above the limits they set at random it seems
Good information but you talked way too much describing something that is almost perfect.
Question, if I'm able to do a Roth 401K but it may push me into the 32% bracket. Is it worth to do?
the 'saving" gene he mentioned at around 37 minutes is not a thing IMO . I used to be a pretty big spender, but about 5 years ago I realized I was behind in retirement savings and now save easily 30% of my income.
I'm interested in roth ira information but I wasn't planning to spend and hour to find out what the 3 biggest advantages of a roth ira.
505
The "which one do I fund: Roth or HSA?" answer I go with is "how much money will I need for medical expenses in retirement?" I think the average nowadays is something like 100k in today's money, mostly in the last few years of your life. (Note this will change, depending on your average lifespan. For example, my family is fairly long-lived, and I'm watching 10k a month go into my grandmother's old folk's home. Thankfully she can afford it, but that's still a good chunk of change; 100k would only last a year or so – and she's been in the home for 5 years now.)
Regardless, 100k in today's money gives us a nice goal to shoot for. So at the least, you should probably optimize on your HSA until you have enough invested in it to cover that expected amount in the future.
Once you hit that? Yeah, de-prioritize it in favor of the Roth. Worst comes to worst, you put too much money in it, and it acts like a 401k….or you put too little in it, and you (instead) invest it in a Roth, and you pay out of that instead.
And now that I write that out, I think I'll agree with Beau – in that erring on the side of the HSA probably makes a bit more sense, as you don't automatically start paying taxes on it in retirement – ie, you'll have your standard tax deduction and whatnot. Therefore, regularly funding the HSA probably is (slightly) more efficient.
EDIT – plus, HSA's don't have any RMD associated with them – so you can let them sit and grow even after age 70.
Ah yes. ROTH assets my favorite topic 😀
Love me some tax free growth!!!
The dynamic between Bo (Beau) & Rebecca is cool!!
I have 60k can I max out a Roth in 2021 and max out again in January 2022?
I'm a huge Roth fan, but I do disagree with how the tax free growth is presented. If your tax rate is the same now and when you retire….the money will be identical using a Roth vs a standard IRA…..Here is the math
$1 Roth will grow to $88…that I agree with.
Assuming 20% tax rate then the numbers would be:
$1.25 IRA initial investment (20% taxes would then drop that to $1) will grow to $110…..Taking 20% taxes you'd end up with $88.
Now the correct argument is you are locking in the tax rate today. My 18 year old for example pays no taxes because she only makes $1,000 a year. When they are older they will obviously be paying higher taxes.
Great show! Good job!
love it