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1/ Happy New Year, everybody! Looking to start 2021 with a major W? Consider opening a Roth IRA!
What exactly is a Roth IRA? Why should I have one? Am I too young / old? Where can I open one?
Let's talk
[THREAD]
What exactly is a Roth IRA? Why should I have one? Am I too young / old? Where can I open one?
Let's talk
[THREAD]
2/ A Roth IRA is an individual retirement investing account, funded with post-tax dollars, that grows tax-free and provides tax-free withdrawals after retirement age.
What does that mean exactly?
What does that mean exactly?
3/ You take your after-tax money, invest it in a Roth, and any gains on the money can be pulled out (after age 59.5) without the IRS asking for ANY of it.
That's right, all gains on these contributions are tax-free...W
That's right, all gains on these contributions are tax-free...W
4/ What are the requirements for a Roth IRA? Am I too young / old?
You are able to put a maximum of $6000 per year to a Roth IRA ($7000 if age 50+) as long as you meet certain income requirements (uses MAGI):
•Single: MAGI below $139k
•Married: MAGI below $208k
You are able to put a maximum of $6000 per year to a Roth IRA ($7000 if age 50+) as long as you meet certain income requirements (uses MAGI):
•Single: MAGI below $139k
•Married: MAGI below $208k
5/ If you exceed these limits? Don’t worry, there are strategies to get money into a Roth IRA, including the Backdoor Roth and Mega Backdoor Roth (DM me if you want to hear about these!).
A Roth is a no brainer for young people, but can also be used for much older investors!
A Roth is a no brainer for young people, but can also be used for much older investors!
6/ So why should you have to put your hard-earned money, that already got taxed, into a Roth?
Sure the benefits when you retire are great. That's a given. If you're thinking about these types of things, congrats you're ahead of the game.
Sure the benefits when you retire are great. That's a given. If you're thinking about these types of things, congrats you're ahead of the game.
7/ But we live in the present. What is this doing for me right now?
There are many benefits, let’s touch on a few:
There are many benefits, let’s touch on a few:
8/
You can pull your CONTRIBUTIONS whenever you want. This is a huge plus over a 401k, which doesn't allow any direct withdrawals before retirement.
Super easy to setup, anybody can do it now (don’t need an employer), and you generally have many investment options.
You can pull your CONTRIBUTIONS whenever you want. This is a huge plus over a 401k, which doesn't allow any direct withdrawals before retirement.Super easy to setup, anybody can do it now (don’t need an employer), and you generally have many investment options.
9/
The money sitting in your savings account (beyond your emergency fund), isn't working for you. At all. It doesn’t appreciate in value and provides virtually zero interest. It's chilling, not paying rent, not doing a thing....(cont’d)
The money sitting in your savings account (beyond your emergency fund), isn't working for you. At all. It doesn’t appreciate in value and provides virtually zero interest. It's chilling, not paying rent, not doing a thing....(cont’d)
10/ You work hard for your money, it's time to make your money work HARDER for you. An investment account allows you to put your dollars to work, as they:
Pay dividends (passive income).
Appreciate over time.
Let's look at some real numbers of this:
Pay dividends (passive income). Appreciate over time. Let's look at some real numbers of this:
11/ Say you're 25 and you max your Roth for 20yrs. Without putting another PENNY in, your $120k in contributions ($6k x 20 yrs) would grow to $1.1M by the time you retire (assuming 9% return).
Nearly $1M in tax-free INTEREST. Your Roth IRA alone made you a millionaire. Boom.
Nearly $1M in tax-free INTEREST. Your Roth IRA alone made you a millionaire. Boom.
12/ Alright, you're sold. Where / how can you open a Roth?
Most major firms (Fidelity, Vanguard, etc.) offer Roth IRAs and make it super quick / easy to open one. They generally have no account fees or minimums. Here are the steps to do so with Fidelity (all are great btw):
Most major firms (Fidelity, Vanguard, etc.) offer Roth IRAs and make it super quick / easy to open one. They generally have no account fees or minimums. Here are the steps to do so with Fidelity (all are great btw):
13/
Go to http://Fidelity.com , click "Open Account," select "Roth IRA"
Fill in details - essentially creating an account (username, password, email, etc.)
Fund your Roth IRA (link a bank account and transfer money)
Pick your investments
Go to http://Fidelity.com , click "Open Account," select "Roth IRA"Fill in details - essentially creating an account (username, password, email, etc.)Fund your Roth IRA (link a bank account and transfer money)Pick your investments
14/ That's it! Congrats, you're officially an investor
. Baller.
Not sure how to pick your investments? Check out my thread below on how to passively invest in index-funds by building a Lazy Portfolio!
https://twitter.com/sai_padhy/status/1343713912508715009
. Baller.Not sure how to pick your investments? Check out my thread below on how to passively invest in index-funds by building a Lazy Portfolio!
https://twitter.com/sai_padhy/status/1343713912508715009
As always, this is not financial advice. Always do your own research and consult with professionals.
I believe in the power of financial independence and just want to share my own thoughts / experiences as I go. Let’s keep learning together
Stay safe and Happy New Year’s!
I believe in the power of financial independence and just want to share my own thoughts / experiences as I go. Let’s keep learning together
Stay safe and Happy New Year’s!
