This is one of those things I wished I would’ve learned and had done when I was younger - open up a Roth IRA retirement account. And because it saves you from paying taxes on your earnings and profits later on, I’m all about it. So this is what a Roth IRA is and this is why it’s so important to have one! Click “SHOW MORE” to read my full thoughts. Also feel free to add me on Snapchat / Instagram: GPStephan
So here’s what it is - and because this confused me when I was younger, I’ll break it down as simple as possible.
A Roth IRA is a type of investment account that you can set up where you invest your money today - up to $5500 per year with no immediate tax deductions - and can pull out your profits and earnings tax free when you’re 59.5. That means you pay NO TAX on YEARS of compounded interest and earnings. Your tax free profits just makes you MORE tax free profits. And it snowballs into a LOT of money.
This is best done when you’re young for a few reasons…the money you invest in a Roth IRA is done post tax, which means taxes are already taken out of the money that you earn at the time you invest it. So if you make $20,000 from a job, you might be left with only $17,000 after paying taxes…so this $17,000 is now “post tax” money. The reason is best when you’re young is that chances are, you’re not earning a ton of money compared to what you WILL be earning. When you’re earning a lot of money, it’s about reducing what you owe in taxes because the more money you make, the more money you’re generally taxed. When you’re not earning a lot of money, you’re already in a lower tax bracket, so it’s advantageous to take advantage of that and pay the taxes now to invest - because in the future, you’ll hopefully earn a lot more money. Especially if you’re 18-30 and not earning a lot of money, this is PERFECT for you. When you start earning more money, there are other accounts that might make more sense for your situation.
So here’s what I would do: If you’re under the age of 18 and have a job that you’re making money with, you can ask your parents to open a Roth IRA account for you. From there, you contribute money you’re making from your job - keep in mind you cannot contribute more than you earn, so if you earn $1000 that year, you can only contribute $1000.
If you’re over the age of 18, right after this video is done, just go online and sign up for a Roth IRA. I use Vanguard and they’re awesome, many people use Charles Schwab or Fidelity - just make sure the account has low fees. You can contribute up to $5500 of earned income every year - if you make too much money, you can look into doing a backdoor Roth IRA contribution. I recommend putting in as much as you can afford and forgetting about it. The advantage is that since there’s compounded interest, the sooner you put your money in, on average, the more you’ll have by the time you retire.
Is this a boring investment strategy? Yes. But it’s effective. I recommend just doing this on the side with what you can afford, while continuing to invest elsewhere or investing in yourself.
Just to give you some ideas, if you invest $1000 per year at 18 and retire at 60, you’ll have $264,000…of that, you only contributed $43,000 over 42 years, meaning you just made $221,000 of tax free money.
If you invest $2000 per year at 18, same situation as above, you’ll have invested $86,000 and made $444,000 of tax free money.
If you invest the maximum right now of $5500 per year at 18 years old, you’ll have invested $231,000 and made over $1,200,000 in tax free money. If you just do $5500 per year at 18 years old, you can retire a millionaire without doing anything else. This average figure includes inflation, by the way.
I hope this video helps and that this sets you up for future financial independence.
Add me on Snapchat: GPStephan
Add me on Instagram: GPstephan
For business inquiries, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq

By Stock Chat

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34 thoughts on “$5500 per year to tax-free millionaire: why you need a roth ira”
  1. Avataaar/Circle Created with python_avatars Aldrin Yousefian says:

    I don’t understand… how can you pull your money out of a IRA without penalty? Treating it like a savings account where I can withdrawn my original contribution without penalty is completely new to me. What am I missing here??? Thanks.

  2. Avataaar/Circle Created with python_avatars Cal Klobuchar says:

    Anyone else worrying about loosing there Roth IRAs or 401ks after switching jobs?

  3. Avataaar/Circle Created with python_avatars Vanessa Rodriguez says:

    Love this video 😀

  4. Avataaar/Circle Created with python_avatars Buttons says:

    What funds do you recommend investing in inside your roth?

  5. Avataaar/Circle Created with python_avatars Chelsea Donell says:

    So do u just put the money in there from bank every month ans leave it jw and it builds interest or whatever

  6. Avataaar/Circle Created with python_avatars Jesus Bernal says:

    the thing is, is Roth IRA only for people from USA?

  7. Avataaar/Circle Created with python_avatars shroud says:

    If I have a brokerage account as well as a Roth Ira, would you say its better to prioritize funds to the Roth ira than the brokerage account?

    For example meeting my monthly requirement for the 6k cap on my Roth Ira first, and then seeing about putting money into an index fund 2nd

  8. Avataaar/Circle Created with python_avatars jbferrer3 says:

    Please someone tell me where i can find this magic unicorn 7%. I beg any of you so i can be rich!!

  9. Avataaar/Circle Created with python_avatars Raymundo69 says:

    Good thing I’m looking at this now at 20 gonna start now

  10. Avataaar/Circle Created with python_avatars Jason Lopez says:

    Thank you so much

  11. Avataaar/Circle Created with python_avatars we wear the mask says:

    I’m 10 and I have both a baby sitting job and a landscaping one ($10/hr average) and I’m putting it all in the Roth IRA.

    I’m also gonna keep living at my parents house. So much tax free savings!!! 😂

  12. Avataaar/Circle Created with python_avatars ann melendez says:

    I'm freaking out, Im 50 and trying to catch up for my retirement. in 15 yrs. 😭😭😭😢

  13. Avataaar/Circle Created with python_avatars The only one says:

    How did it grow though . 1000$ to 1300$???? Interest ??? Or cuz you invested it in stocks ?

  14. Avataaar/Circle Created with python_avatars Richard Allen says:

    U guys, im 40 and just starting my retirement. I make good money selling cars. But i lived in a car a long time. If u think ur late and its hopeless, just go and start!!

  15. Avataaar/Circle Created with python_avatars Dingfelder Smurfalot says:

    Whatever the financial instrument, be it a 401k or any of the types of IRA, or just investing the ordinary way, it's never too late. My mother first started contributing to her 401k seriously in her 60's, and the catch-up program let her put in more than the usual limits. She started putting in like 60% of her salary or something crazy like that, and now her portfolio makes her feel reasonably secure and grosses her something like $100/day just for sitting around.

  16. Avataaar/Circle Created with python_avatars Nasrin Sultana says:

    You said put that amount you earned that year .
    You mean one years income 3000.00 or each month?

  17. Avataaar/Circle Created with python_avatars Usha says:

    you are saying we can contribute even income is 200 and 500k??

  18. Avataaar/Circle Created with python_avatars Usha says:

    what if income is over 138k and one can no longer contribute to Roth ira, then that money will be sitting till 59?

  19. Avataaar/Circle Created with python_avatars Canyon says:

    Maxed out my IRA for the first time at 21. I'm glad that you're posting so much about personal finance Graham. With so many finaical ideologues on YouTube like Dave Ramsey it's great to see someone promote more nuanced financial advice. Keep up the good work.

  20. Avataaar/Circle Created with python_avatars OBJ Mandala says:

    Just the same way I saw testimony of how Austin helped a man make -$50,000 weekly Profit I tried now am also sharing my testimony with over,$10,000 from the company thanks for the good did he has done for me for this short period of time

  21. Avataaar/Circle Created with python_avatars Bikram Bhattarai says:

    Thank you

  22. Avataaar/Circle Created with python_avatars Yoseph Tiguh says:

    Thoughts on using a TD Ameritrade account to create my Roth IRA?

  23. Avataaar/Circle Created with python_avatars Christopher Sands says:

    As I'm from the UK I've opened the UK equivalent which is called a life time ISA
    Which includes the government contributing 25% of what I contribute unto £4000 a year so I put the full amount in and get a FREE £1000 a year wooohooooo

    Plus love all your vids man, who,

  24. Avataaar/Circle Created with python_avatars Eric McClelland says:

    Maybe this is a silly question can anyone tell me if this is the same or similar to a superannuation fund (I'm in Australia) 🇦🇺

  25. Avataaar/Circle Created with python_avatars Pacific excursion says:

    Opened mine yesterday lol. Better late than never! Started doing YouTube again too thanks to graham here 🥂

  26. Avataaar/Circle Created with python_avatars Danny Dabbles says:

    “SunCor Financial MPI review"

  27. Avataaar/Circle Created with python_avatars jonathan_ carbajal says:

    Hey graham so I am going to be opening a Roth ira very soon and I asked my parents about it and they didn’t really get into it but my mom said that the IRS WILL GET INVOLVED Is that true?????

  28. Avataaar/Circle Created with python_avatars Billy Mays says:

    I’ve been trying to take this seriously but I can’t keep myself from singing “I can’t keep on losing you” in an Anderson paak voice

  29. Avataaar/Circle Created with python_avatars M Bank says:

    A question please. So all I need to do is just open a Roth IRA account and put money in there, and that is all I need to do ? Shouldn't I be actually buying something first with that account in order to get the "snowball" rolling ? Thanks

  30. Avataaar/Circle Created with python_avatars Anthony Aboitez says:

    I’m barely starting and I already have Roth IRA account open. My question is… is the money growing in the Roth IRA alone with compound interest or is he talking about the money growing with a index account under the Roth IRA?

  31. Avataaar/Circle Created with python_avatars Louie Joe says:

    Can't get one UK

  32. Avataaar/Circle Created with python_avatars Ultrabenbooyah says:

    Me in Germany: cries in Riester

  33. Avataaar/Circle Created with python_avatars Tart28 says:

    the mac miller in the background.. just realized that. you're a G Graham

  34. Avataaar/Circle Created with python_avatars Javier Tabora says:

    If I would of known this when I was 18 😭

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