Roth IRAs are so good that they’re probably not going to last. I think that one of these days the federal government is going to say, “Wait a second, that’s just too good of a deal,” and they’re going to yank it, so you want to get one now and grandfather that thing in.
What is a Roth IRA?
A Roth IRA is an individual retirement account similar to a 401k or a traditional IRA. They offer a valuable future tax break. Since they are taxed when you put money into them, the income is tax-free on retirement.
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What is a Roth IRA?
When it comes to retirement planning, understanding different types of investment accounts is crucial. One popular option that individuals can consider is a Roth IRA. So, what exactly is a Roth IRA, and how does it differ from other retirement accounts?
A Roth IRA, also known as an Individual retirement account, is named after the late Senator William Roth of Delaware, who introduced this retirement savings option in 1997. It is a type of investment account that allows individuals to save for retirement and potentially enjoy tax-free growth and withdrawals in the future.
The key distinction between a Roth IRA and other retirement plans, such as traditional IRAs and 401(k)s, lies in the tax treatment. While contributions to traditional IRAs and 401(k)s are made with pre-tax dollars, meaning they are deducted from your taxable income in the year they are made, contributions to a Roth IRA are made with after-tax dollars.
One of the major advantages of a Roth IRA is its tax-free growth potential. Once you’ve contributed funds to a Roth IRA and the money is invested, any future earnings, including capital gains, dividends, and interest, can grow tax-free. This is a significant benefit, as the accrued wealth is not subject to taxes when withdrawn during retirement.
Additionally, a Roth IRA offers more flexibility and control compared to other retirement accounts. Unlike traditional IRAs or 401(k)s, a Roth IRA doesn’t require you to take mandatory minimum distributions (RMDs) after reaching a certain age. This means you can let your investment grow for as long as you prefer or pass it on to beneficiaries without any forced withdrawals.
Another notable advantage of a Roth IRA is the ability to withdraw your contributions at any time, penalty-free. However, withdrawing earnings before reaching age 59 ½ may result in a penalty unless they qualify for certain exceptions, such as education expenses or a first-time home purchase.
It is important to note that there are income limitations on who can contribute to a Roth IRA. As of 2021, single individuals with a modified adjusted gross income (MAGI) of $140,000 or more and married couples filing jointly with a MAGI of $208,000 or more are not eligible to contribute to a Roth IRA directly. However, there is an option called a “backdoor Roth IRA” that allows high-income earners to indirectly contribute.
In conclusion, a Roth IRA offers several advantages, such as tax-free growth and flexibility, making it an attractive retirement savings option for many individuals. However, it is crucial to consult a financial advisor or tax professional to determine if a Roth IRA is the right choice for your specific financial situation and retirement goals.
did he say 25%, try 2.5%, what is he talking about.? giving information like this shows the degree of dishonesty of this person.
Where can you get even a 1% what's this 15 or 25% this is totally bogus
What about those of us who can’t invest in Roth’s?
Can you do this if you live Australia and u not American
Total rubbish 15 to 25%.
This guy doesn't even explain what the hell are Roth IRA is, he's just throwing money around and trying to make people feel good
I'm interested. But this sounds confusing
Im confused, what happens to the money to make it grow and what did he mean qith the 15-25% thing?
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you forgot to say that we CANT INVEST every month but according to your rule 1 we need to sit on cash and wait for proper moment so that limit our yearly return because in 20 years we would have maybe 3 opportunities to invest it all
So much wrong information crammed into such a short video, its astounding to me.
phil town just changed my life.
The definition starts with … it is very good to have… ?!
I stopped watch after he used 25% are his annual return rate. This turn it from an informative video to a Scam Video!
20% per year return? Is that a realistic expectation?
If your employer offers a matching contribution in 401K, would you still recommend Roth IRA as better investment/retirement product?
Yah its correct 401k and 403b we can take money by without taxes
If you are in a 33% state plus federal tax bracket, you can put $1500 in a traditional IRA or pay taxes on it and put $1000 in a Roth IRA. If at retirement you have attained a 100% return on you investment, you will have $3000 in the Traditional IRA or $2000 in the Roth. If you have lots of other income when you take it out so that you pay 33% tax then you would have the same $2000 as the Roth. However if you take out the IRA money and pay taxes starting at 0% and go up the scale, you will pay much less tax than you did with a Roth.
This vid appears on "Personal Finance Basics" playlist twice. FYI
It's impossible to get a 25% return
I have a multi layered question concerning a Roth . Can I start one with Scottrade and just fund it and let it grow, or do I have to actively buy or trade stocks? I Would prefer just to contribute to the max and be hands off or is this unreasonable to assume I can do? Your help would be greatly appreciated, thanks.
He said 25%. That's bullshit. You're winning at 8%. 10% is good but keep it practical and go for 5%
25% a year? In what universe?
So informative!! Thank you, Phil! 🙂
The only time I hear people say 25% are usually Ponzi schemes.