One of my favorite retirement accounts is a Roth IRA for many different reasons. A Roth IRA is a type of individual retirement account that allows individuals to make after-tax contributions to the account, and to withdraw the contributions and earnings tax-free after a qualifying period. In this video, I’ll go through 10 of the most common mistakes I see investors make.

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A non-working spouse can open a Roth IRA if their partner has taxable income and they are married and file their taxes jointly. In 2023, the contribution limit is $6,500 for those under the age of 50 and $7,500 for those 50 and older.

Maxing out your Roth IRA every year is extremely important. Since you cannot go back to retroactively contribute money for previous years, you should try to contribute up to the limit every year. You have up until the tax deadline (of the following year) to contribute to the current year.

I’ve seen a lot of people forget to invest money once they deposit it into their Roth IRA. This is a big mistake a lot of people make because this is how they’re expecting to grow their money for retirement. It helps if you have automatic investing set up for your account so you can avoid this issue.

Withdrawals from a Roth IRA before age 59 1/2 are generally subject to taxes and penalties unless they meet certain exceptions. Some of the most common exceptions include being able to withdraw your contributions. Another is for first-home buyers where you can withdraw up to $10,000 for the purchase without incurring taxes or penalties. There are a few others and there are restrictions with each one so do your own research on this one.

Maxing out your Roth IRA before your Taxable Brokerage account is very important. A Roth IRA is exempt from taxes while the money is growing and when you withdraw it. With a taxable investment account, you have to pay taxes on the dividend distributions, while it’s growing, and when you withdraw any gains from the account. From a tax perspective, it makes sense to make sure you’ve contributed up the max within your Roth IRA before investing in your taxable account.

Understanding your personal risk tolerance is very important so you don’t invest in a way that doesn’t suit your personality and long-term goals. Since money with a Roth IRA is never taxed, you want this account to get as large as possible. This could cause some investors to take on more risk than they normally would try to get this account to grow very large. It’s not worth it so make sure to understand how much risk is right for you.

You have to be under a certain income limit to be able to contribute to a Roth IRA. I list out what those look like in the video. If you happen to be above them then you can still contribute to a Roth IRA through something called a Backdoor Roth IRA. Make sure to understand the tax consequences before doing this.

00:00 Roth IRA Start
00:26 What Is A Roth IRA
00:45 Joint Roth IRA
01:22 Downside Of Not Maxing Out Your Roth IRA
01:55 Roth IRA Deadline
03:10 Growing Your Roth IRA
04:21 Roth IRA Withdrawal Rules and Mistakes
06:51 Roth IRA vs Brokerage Account
07:22 High Risk Roth IRA
08:11 Roth IRA Income Mistake
09:27 Having Multiple Roth IRAs
10:06 Multiple Roth IRA Contributions

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Disclaimer: This video is for entertainment purposes only. Everyone’s situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio. Always remember that incentives determine the type of advice they give you so one that charges an hourly fee is less likely to be problematic….(read more)

LEARN MORE ABOUT: IRA Accounts

CONVERTING IRA TO GOLD: Gold IRA Account

CONVERTING IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

retirement planning is a critical part of financial planning. One of the best ways to save for retirement is through a Roth IRA. However, there are some mistakes that can be made when investing in a Roth IRA that can be costly.

One of the most common mistakes is contributing too much to a Roth IRA. The maximum annual contribution to a Roth IRA is $6,000 for 2021, with an additional $1,000 “catch-up” contribution allowed for those age 50 and over. If someone contributes more than the annual limit, they will be subject to a 6% excise tax on the excess amount.

For example, if you contribute $65,000 to your Roth IRA in one year, you will be subject to a $3,900 excise tax. This is a significant amount of money that could have been saved or invested in other ways. It is important to be aware of the contribution limits when investing in a Roth IRA to avoid this costly mistake.

Another mistake to avoid is not taking advantage of the tax benefits of a Roth IRA. A Roth IRA allows you to make contributions with after-tax dollars, meaning that you will not be taxed on the money when you withdraw it in retirement. This can be a great way to save on taxes, as you will not have to pay taxes on the money when you withdraw it in retirement.

Finally, another mistake to avoid when investing in a Roth IRA is not taking advantage of the tax-free growth potential. A Roth IRA allows your investments to grow tax-free, meaning that you will not have to pay taxes on any gains. This can be a great way to maximize your retirement savings and take advantage of the tax benefits of a Roth IRA.

Investing in a Roth IRA can be a great way to save for retirement, but it is important to be aware of the mistakes that can be made. By avoiding the $65,000 Roth IRA mistake, you can ensure that you are taking full advantage of the tax benefits of a Roth IRA and maximizing your retirement savings.