00:00 Intro
00:19 Roth IRA 101
02:28 Growth Potential
04:26 Realistic retirement planning
05:22 No RMDs
06:45 Legacy Planning
07:29 Back Up Emergency Fund
08:34 Uncertain Future
09:40 Potential Tax Changes
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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When it comes to saving for retirement, there are a variety of options available to individuals. One popular choice is the Roth IRA, which offers unique advantages that can help individuals build a strong financial foundation for their future.
Here are seven powerful reasons to max out your Roth IRA:
1. Tax-free withdrawals in retirement: One of the most attractive features of a Roth IRA is that withdrawals in retirement are tax-free. This means that any growth in your account, as well as your contributions, can be accessed without having to pay any taxes on the money.
2. Flexibility in withdrawals: Unlike traditional IRAs, which have required minimum distributions starting at age 72, Roth IRAs do not have any required withdrawals. This gives individuals more flexibility in how they access their retirement savings and allows them to leave the money in the account to continue growing tax-free for as long as they like.
3. Potential for higher returns: Because Roth IRAs are funded with after-tax dollars, any growth in the account is also tax-free. This can allow individuals to potentially earn higher returns on their investments compared to taxable accounts, where earnings are subject to capital gains taxes.
4. Access to contributions penalty-free: In addition to tax-free withdrawals in retirement, individuals can also access their Roth IRA contributions penalty-free at any time. This can be particularly valuable for emergencies or unexpected expenses that arise before retirement.
5. Estate planning benefits: Roth IRAs offer unique estate planning benefits, as they do not have required minimum distributions for the original account owner. This means that individuals can leave their Roth IRA to their heirs, who can continue to enjoy tax-free growth on the account for years to come.
6. Diversification of retirement income: By contributing to a Roth IRA in addition to other retirement accounts, individuals can diversify their sources of retirement income. This can help protect against changes in tax laws or market fluctuations that may impact other retirement savings.
7. The best reason of all: The best reason to max out your Roth IRA is simple – it’s a powerful tool for building wealth and securing your financial future. By taking advantage of the unique benefits offered by a Roth IRA, individuals can set themselves up for success in retirement and enjoy the peace of mind that comes with knowing they have a solid financial plan in place.
In conclusion, maxing out your Roth IRA is a smart and strategic move for anyone looking to secure their financial future. With tax-free withdrawals, flexibility in accessing your savings, and the potential for higher returns, a Roth IRA offers a range of benefits that can help individuals build wealth and achieve their retirement goals. So why wait? Start contributing to your Roth IRA today and take control of your financial future.
Great video, Aaron! I never knew about the power of compound interest in a Roth IRA. Have you ever considered diversifying your retirement portfolio with crypto? Check out My Digital Money, a platform that allows you to securely trade cryptocurrency in a tax-advantaged IRA. It's a game-changer for retirement planning!
Wow, I watch to financial youtubes all the time. This is one the best ones I've seen. You are very practical and spell things out in an easy to understand fashion. Also, your delivery is great. Great voice, great appearance… please keep it up! Mark
My only 'add' is that if you have an investment idea / concept which might pay 'outsized' gains, then a Roth is a perfect place to park your funds.
Peter Thiel placed $2,000 of Paypal to become $5B from Paypal. It will never be taxed.
Maybe you loved Apple or Tesla and were mostly certain it would triple. $10,000 would become $30,000 and no capital gains and no future tax from a traditional IRA.
You never mentioned 5 year rule.
I have a very good income and contributing max to 401k and putting in my wife's roth IRA. I have so much cash on side lines until I can figure this out. I am 53 and needs to to make all this cash work for me so I can retire tomorrow.
I don't think I've asked this before but one thing I haven't seen anyone talk about is when during the year to take withdrawals. Most people talk about what you can take on a yearly basis but from a budgeting standpoint that seems like a nightmare. We're big budgeters in my home and taking a lump some once a year seems contrary to that – and, truly, anyone else that isn't rolling in it. We can put it in an account and draw on it but it would make more sense to at least do it quarterly. I wonder however if that would only increase transaction fees.
Long story short, like the channel and common sense you promote.
I'm just surprised not everyone under 50 maxes out their Roth IRA… You're limited to 10k married and 7k single… It's easy to hit for almost every income range above 40-50k.
Hi Erin. My wife and I really enjoy your videos. We find them very informative. As I get closer to retirement I'm doing more research on my retirement account, how much should I have in order to comfortably retire, etc. Of all the videos I see about that, none of them take into account pensions. I'm a federal employee so I an annuity in addition to my retirement (TSP) and my social security. I know pensions are a rare thing but I'm hoping that you would do a video on calculating how much a pension would be worth when determining one's financial strength in addition to the retirement (TSP, 401K, etc.) account and expected social security benefits. Thanks.
Thanks, that helps me further decide to take advantage of the 403b Roth I have access to – no need to do a backdoor roth anymore, or annual limits. The points you make about future tax changes and rule changes are really valid to consider.
Taxes are killing everyday Americans .
It's definitely an election year and clearly some channels are pushing for Trump.
The videos are on the nose as always.
Putting it in a ROTH IRA makes sense if you think you'll pay more in retirement on taxes than now. If you are a super saver, or have a LARGE regular 401K, (RMDs kick in) then ROTH might be for you. Right now, Trumps tax breaks are about to end. Right now might be especially worth it. But as old tax rates kick in, a regular 401K investment might be the first choice.
Now here's the flaw in the slaw: Predicting your final tax bracket in retirement is a huge guessing game. If I'm 15% now, and at retirement I'm at 15%, then the 401k/ROTH is a wash unless you are looking at RMDs. You never know when you'll be laid off and stop retirement contributions. So there's a lot of variables there. You also don't know the future tax structure, inflation or market performance will look like. So it doesn't hurt to hedge your bets if you are a super saver. But always pull your regular 401K first to avoid RMDs, (or to minimize them)
Bonsus tip: If you are laid off, and your income really suffers, back dooring the ROTH might be good (if you don't need to worry about the layoff savings money…like if you have like $80k in emergency reserves) That's because your income overall will be quite low, putting you in a lower tax bracket.
I have an older underfunded Roth. Can I contribute into that Roth now up to my limits? Do I have to wait 5 years to withdraw profits from that fund?
If you have the money up front do you suggest maxing out the Roth every January or dollar cost averaging?
Hey Erin , very good video . I can do better editing in your videos which can help you to get more engagement in your videos . Pls lmk what do you think ?
Listen to 1:45, it states “$176k to $161k”, I think it was intended to state “$147 to $161k”.
Roth emergency fund… Erin, your advice doesn’t hold up to the math.
Why would anyone put after-tax money into a taxable account when they could put it into Roth and access the principal anytime penalty-free? It’s the best of both – until (and after) the emergency funds are needed, the gains compound tax-free forever. Roth should be the first savings account to be filled up, and taxable accounts should be the last.