5 Ways to get to Millionaire Status with a Roth IRA

So you want to be a millionaire? Here’s how a Roth IRA helps get you there.

What in the hell is a Roth IRA?

It’s a tax advantaged retirement account for American earners. There are a few rules:

·         If you file taxes as a single person, you can open a Roth IRA if you earn $116,000/year or less

·         If you file taxes as a couple, you can open a Roth IRA if you earn $183,000/year or less

·         You can’t put more than $5,500 into your Roth IRA for 2016

·         If you have money left in your Roth IRA after you die, your heirs may be required to take minimum distributions from it

·         You must earn income in a given year to use a Roth IRA

Getting to millionaire status with a Roth IRA is easy because…

1. They let you invest in whatever you want

Your workplace 401k is nice, but it limits your options for investing. In fact, some unscrupulous plan managers accept incentives from mutual funds to offer high fee plans to employees and it’s totally legal! That means high fees for employees and lower returns overall. A Roth IRA? That’s all yours. You can invest in a huge number of mutual funds on the open market and pick the one that works best for you. Total freedom means lower fees and higher returns and that means you get to “millionaire” status faster.

2. They provide compound interest

What’s the most powerful force in the universe? Gravity? Light? Whatever it is that keeps the Kardashians famous? Nope. It’s obviously the heading to this paragraph: compound interest. Once you’ve got your money invested into a Roth IRA it starts earning you interest. That’s money you get simply for having money! The compounding part comes in when that money you earned for having money starts earning its own money! That is some dark magic going on right there, and it means you get to millionaire status faster thanks to your Roth IRA and the most powerful force in the universe: compound interest.

3. They grow tax free

Roth IRAs are tax advantaged which means the government protects them from taxes to incentivize you to put money into them for retirement. For your Roth IRA you put in money you’ve already paid taxes on, but the money in the account grows tax free. That’s all of your compounding interest growing without any taxes coming out, which in turn gains you more interest, which garners more, and then more, and all the while no taxes! You’ll be a millionaire in no time.

4. Your withdrawals are tax free too

The government is serious about getting you to put money into your Roth IRA. How serious? Not only will they let your investments grow tax free, adding a little extra juice to the most powerful force in the universe that is compound interest, but when you take money out of your Roth IRA? That money is tax free too! Are you kidding me? Ben Franklin once said, “The only certain things in life are death and taxes,” but when it comes to the Roth IRA the IRS has made clear: taxes aren’t a certainty! (The IRS also wants to make clear: you’re on your own for the death thing).

5. You can make catch up contributions

Sometimes life gets in the way. It happens. Nothing to be ashamed of. You wouldn’t be here if you weren’t human, right? The Roth IRA takes that into account and offers you one final method for getting to millionaire status: the catch up contribution. If you’re 50 or older and you’re looking to juice the wheels on your retirement options you can make extra contributions to your Roth IRA to “catch up” to where you want to be before retirement. Your new limit once you reach 50? It’s $6,500, an extra thousand bucks towards making you a millionaire.

The Roth IRA is a powerful retirement tool that can take you to seven figures of net worth while protecting you from taxes. Looking to start yours? Check out Vanguard today for more information.

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