A Roth IRA is a wonderful account to build a tax-free income, but there are little rules and nuances about these accounts that enable us to get even more out of them and plan our finances even more effectively with them.
In today’s video James Conole is going to share with you seven little-known Roth IRAs benefits so you can become a better financial planner.
Learn the tips & strategies to get the most out of life with your money.
⏰ TIMESTAMPS
00:00 – Introduction
1:30 – Roth IRA Benefits
2:15 – Roth IRA Investing
3:40 – Roth IRA Tips
4:45 – Tax-Free Income
6:55 – Financial Planner’s Retirement Tips
8:45 – Roth IRA & Financial Planning
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If you’re looking for a retirement savings option that offers more flexibility and control than a traditional IRA, then a Roth IRA may be the perfect solution for you. Roth IRAs are a type of retirement account that allow you to save money on a tax-free basis, meaning you won’t have to pay taxes on the money you withdraw from your account. While the benefits of a Roth IRA are well-known, there are also some lesser-known advantages that can make this type of account even more appealing. Here are seven of the most important benefits of Roth IRAs that you may not be aware of.
1. Tax-free growth: One of the key benefits of a Roth IRA is the ability to enjoy tax-free growth on your investments. This means that any earnings you make on your investments, such as interest or dividends, will not be subject to taxes. This can be a great way to maximize your retirement savings and ensure that you have more money to use during your retirement years.
2. Tax-free withdrawals: Another key benefit of a Roth IRA is that you can make tax-free withdrawals from your account. This means that you won’t have to pay taxes on any money you take out of your account, which can be a great way to maximize your retirement savings.
3. No required minimum distributions: Unlike a traditional IRA, a Roth IRA does not require you to take out a certain amount of money each year. This means that you can keep your money in the account for as long as you want, allowing you to maximize your retirement savings and enjoy tax-free growth for longer.
4. Contribution flexibility: Roth IRAs also offer more flexibility when it comes to contributions. Unlike a traditional IRA, you can make contributions to a Roth IRA at any time, as long as you have earned income. This means that you can save more money throughout the year, allowing you to maximize your retirement savings.
5. Contribution limits: Roth IRAs also have higher contribution limits than traditional IRAs, meaning you can save more money in a Roth IRA. In 2021, the maximum contribution limit is $6,000 for those under the age of 50, and $7,000 for those over the age of 50.
6. Early withdrawals: Another benefit of a Roth IRA is that you can make early withdrawals without penalty, as long as the money has been in the account for at least five years. This means that you can access your money early if you need it, without having to pay a penalty.
7. Inheritance benefits: Finally, a Roth IRA can provide significant benefits to your heirs. If you pass away, your beneficiaries can inherit your Roth IRA and take advantage of the tax-free growth and withdrawals that it offers.
These are just a few of the many benefits of a Roth IRA that you may not be aware of. If you’re looking for a retirement savings option that offers more flexibility and control, then a Roth IRA may be the perfect solution for you.
A Roth wouldn't put your children in a high tax bracket when you die.
I have a question on Roth rollovers…. Due to the 250,000 limit on SIPC insurance of a single investment account…. My TD Ameritrade account has over 400,000 in it. I want to rollover the excess to a Schwab Roth IRA account. can I do this under current IRS rules and if so can I make more than one a year…. say I have 750,000 and want to roll 250000 to Schwab and 250000 to e-trade? Thank you… your you tube was very informative.
‘’Courage taught me no matter how bad a crisis gets … any sound investment will eventually pay off."
Question; I have a Roth 401(k) and I also have a Roth Fidelity. I could contribute up to $7000 because of my age. Can I contribute $7000 into each account or does it have to be a combined total of $7000?
What’s your opinion about pulling out $40K of my contributions to buy 2nd property? This would leave me with $20K of growth in the account. Already rocking the 401K maxing out each year with dollar cost averaging.
For even more clarification, according to Michael Kitces: “Accordingly, it's also worth noting that because the 5-year rule for Roth conversions merely leaves the withdrawal of conversion principal potentially subject to the early withdrawal penalty, any other exceptions to the early withdrawal penalty can still shelter the Roth conversion amount from the penalty. *Thus, withdrawals within 5 years of conversion by someone who is already over age 59 1/2 are not subject to the early withdrawal penalty, regardless of the 5-year conversion rule, simply because being over age 59 1/2 itself is an exception to the penalty!”*
If I contribute 10k per year for five years to my Roth 401k from age 45-50 , then leave my job at age 50 and roll the Roth 401k into my Roth IRA , can I then take that 50k contribution out at any time from my Roth IRA ?
Thank you for the information, I just learned about the spousal ROTH eligibility, good stuff. Also, I did not know about the withdrawal additional tax benefits, very cool
You should review and clarify your 5 year comments. A conversion is considered a contribution, so if the account has been open for 5 years the only 5 year rule that applies to a conversion is related to the 10% penalty for withdrawals before 59.5. I would include a link to the Forbes article that says this, but then youtube would delete my comment.
As a value investor, I am certainly using this time to double down on high quality, long-term value investments. Once in a blue moon type deal where we get these big blue chips on such steep discounts!
Another little-known benefit to the IRA and Roth IRA is that you are not stuck exposing them to the Wall Street casino. Utilizing a self-directed IRA custodian, you can invest in real estate syndications, businesses, private lending, or even (ecch) crypto. Peter Thiel grew his IRA to $5 billion (yes, with a b); and Mitt Romney already had $100M in his tax-advantaged accounts by 2012. They didn’t get there by betting $2k or $6k / year on some mutual fund. They invested in what they knew: private businesses and start-ups. So, even though the big Wall Street firms won’t let you know you can invest this way, you are ABSOLUTELY allowed to do so under the IRS rules. I sleep so much better with every dollar that I move out of the stock market and into investment opportunities that I understand.
Great job explaining the nuances of the 5 year rule!!!
Question: does the IRS recognize ALL conversions FIRST before ANY growth?
Example: The past seven years I have converted 50K per year on the15th of April.
1st year conversion is now worth 90K,
2nd conversion is now worth 80K,
3rd conversion is now worth 70K,
4th conversion is now worth 60K,
5th conversion is now worth 50K,
6th conversion is now worth 40K,
7th conversion is now worth 30K.
How much can I withdraw today, penalty free based only on the 5 year rule?
Always the best content via James Conole! Thank you very kindly.
"The more tax-free income you have the higher your standard of living will be in retirement"
Isn't true, picking the IRA where you pay the least amount of taxes will provide the higher standard of living. While a Roth IRA is tax-free in retirement it is not tax-free when you make the contribution and the question is will you be in a lower or higher tax bracket in retirement, of course this includes all taxes
Truth is Everyone needs more than there salary to be financially stable. The the best thing to do with your money is to lnvest it rightly because money left for saving always end up used with no retur