Learn how easy it is to retire a millionaire by comparing the Roth IRA vs Traditional IRA and which one is best for you. Thanks for watching!
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Deciding between a Roth IRA and Traditional IRA can be difficult. There always seems to be multiple choices in life but no one to easily explain how to decide between those choices.
Choosing between a Roth IRA and Traditional IRA (or Roth 401k vs Traditional 401k) is simple and comes down to personal preference for tax treatment and what your end goals are.
Typically, those in lower tax brackets prefer a Roth IRA, while those in higher tax brackets prefer a Traditional IRA.
This is because those in higher tax brackets expect their income to be lower in retirement, so they prefer to defer their taxes until later, while those in lower tax brackets expect their income to increase, so paying taxes in a lower bracket today makes more sense.
However, both Roth and Traditional IRAs (and 401ks) are investment accounts, and can compound into millions of dollars by the time you reach retirement, depending on how old you are and how long you keep them invested.
For this reason, it might still be wise for individuals in higher tax brackets (especially if you’re young), to use a backdoor roth IRA to shelter investment growth from taxation in the future. It doesn’t make sense to avoid paying taxes on $100,000 now so you can pay taxes on $200,000 later.
Which one you choose comes down to personal choice, and this video will go into detailed calculations to help make the choice clearer….(read more)
LEARN MORE ABOUT: IRA Accounts
INVESTING IN A GOLD IRA: Gold IRA Account
INVESTING IN A SILVER IRA: Silver IRA Account
REVEALED: Best Gold Backed IRA
awesome video!! but I didn’t understand where did you get the additional 720/year and the 333,908 on the traditional account
Big ups to everyone working effortlessly trying to earn a living while building wealth. I’m 50 and my wife 44 we are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money. Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income.
Thanks to fire movement.
Is Roth better than investing into an index through a brokerage account?
Dude, that Thiel example is completely misleading.
Withdrawal Example may not be realistic
* Assuming to Take-Out Only $40k/year and that that is the only final Income Taxable is erroneous because
– at Age 72, you will have to Take Out Required Minimum Distributions (RMD) of 1/27.4 = 3.6496% on the $3,162,039 balance = $115,402; then each following year at a higher rate…
– Not only is that a higher Income, but results in a Higher Tax Bracket
** ALSO, you will be getting Social Security – and at that RMD Level – 85% of the Social Security will get Taxed;
* and depending on your Spouse’s Income, you could be in jeopardy of IRMA Premium Penalties on both the Medicare Part B and Part D
Please do a video on Peter Thiel's Roth IRA.
I may be dumb but I’m not understanding the math of getting from $500 per month for 40 years @10% growth resulting in over $3,162,000. 00. Can you point me in the direction of an illustration that calculates this scenario?
Great video, I can watch this all day, well I have to say having multiple sources of income is the best peace of mind anyone can get. I have a construction firm that deals on repairs and renovations on buildings, I also decided to go into investment in stock. The firm however for some months has gone down revenue wise, I just manage to pay my workers from the little that comes in. Luckily for me I have my stock to fall back to, thanks to my stock broker Suzanne Stephens Ellis, I do not have to do anything, and I get my returns in due time. Get her valid information and contact online.
Taxable Ira withdrawals in retirement will raise tax on your social security benefits, so beware. Why not do both for more flexibility. I just retired with social security benefits, Ira, Roth Ira and a teamsters pension. Not bad for high school grad. Used part of my Roth to pay off my mortgage. Plan, plan, plan. Good luck.
Roth is superior regardless of your income. Yes it hurts to pay taxes that year on the 19,500 but much better than paying ordinary income taxes on all of that growth when you start pulling it out, even if your marginal tax rate is lower because the sheer amount you will be pulling out is so much greater. There is a reason they are trying to stop high earners from contributing to Roth 401k and from doing the back door IRA conversions.
I always like to get the taxes paid first not later, ROTH IRA for me, thanks
This was helpful. You should have more subscribers with this quality content. Keep producing and they will come.
long story short…………………if your target is 40k per year……………just get 1million invest into divedend paying stocks averaging 4% = $40k tax free, no 12% tax….. BOOM best plan yet. oh and if you need more then 40k dip into the roth acct…………… thats why you should have multiple buckets to pull from…………….
I don't understand why people don't talk about this….. oh wait probably because most people dont know the first 40k in divedends arent taxed
There is an additional risk in the Roth. What are the chances that the laws will get changed? If the government starts hungrily eyeing those 'rich people' retirement accounts the Roth has a much better chance of having its laws altered.
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If you are expecting to have decent hauls in retirement, and you are a millennial or younger, you are better off with a Roth. The way the government spending is heading, raising taxes in inevitable. By the time we retire the tax rate is going to pull well over 50% just for federal. It is about to cross 29T. Let me show you the zeros: 29,000,000,000,000. This is a factor most don't consider.
In a lot of cases people contributing to retirement is lower than the max and the amount they contribute is based on thier budget. So, they may contribute less each month to the retirement account if they are taxed up front to see the same amount of money in their checking account. So you could look at the balance difference instead of the tax advantage as a lump sum. IOW if they are putting 20% less in up front because of the tax up front ($400/month in Roth vs $500 in traditional) then where would they end up?
I’ve been putting $26k a year in my work 457B for several years, but I am over 50
Wrong, the IRA has income limits. Here are the traditional IRA phase-out ranges for 2021:
$66,000 to $76,000 – Single taxpayers covered by a workplace retirement plan.
$105,000 to $125,000 – Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
$198,000 to $208,000 – A taxpayer not covered by a workplace retirement plan married to someone who's covered.
$0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan.
I stopped contributing to a Roth at age 51 and started contributing to a traditional IRA. My thinking was when I start withdrawals I will take less than the standard deduction from the traditional which will make it tax free. I can take what I need from the Roth which is automatically tax free at that point.
There is another reason to have All retirement funds in a Roth IRA. If you want to spend it all. It’s very expensive in taxes to convert a million dollars out of an IRA before you die, especially if you are a widower. You’ll be too old to enjoy that very expensive thing you wanted to buy when you retired. You can just pay 30 to 40% in state and federal taxes if you want along with social security being taxed and ERMA kicking in on your Medicare premiums for an additional $400 a month in premium being withheld.
Say my wife and I make $210,000 total per year but we both contribute to standard IRAs so our taxable income is below 198K. Are we still eligible? I've been offered a SEP retirement contribution in lieu of health insurance. Would that raise my total income?
Your example of Peter Theil turning $2000 into $5B was not because it was in a Roth. He’s the founder of Pay Pal and bought shares for pennies which skyrocketed within the Roth. If it was in a traditional IRA the value of that account would be way higher than the Roth. No taxes while it’s growing in a traditional. Who cares if he has to pay taxes on withdrawals. It’s trivial when your talking billions of dollars.