Let’s dive in on this email into what are the differences between a Roth IRA and a Traditional IRA as well as talk about which one you should use. Sound good? It’s really fast and easy to break down. I’ll keep it super simple
First, both a Traditional IRA and a Roth IRA are Retirement plans setup by the Government/IRS to allow you to put in a max of $6,000 per year per adult. So if single, then you can put no more than $6,000 into an account per year. If married, you both can but up to $6,000 per year = $12,000 per year total. Also, you can mix and match. For example $3,000 into a Traditional and $3,000 into a ROTH. It is totally up to you but you can only contribute $6,000 total per year per person. That’s the law as of 2021. The IRS does update this from time to time. It could increase with inflation or just because want to.
Both of these can be invested in whatever you want. Stocks, Mutual Funds, Index Funds, etc… These are called Retirement wrappers. They simply take a normal investment and put tax rules around them. For example, you can not withdraw the funds without paying a tax fine, taxes on the money, and fees until you are 65 years of age. So NEVER take money out. It’s costing you a lot to do so. It is never worth it.
A Traditional IRA gives you a tax write-off. This means whatever you contribute, $500 or the ma $6,000 you get to write off for the year and pay less taxes. Sounds amazing right. YES! BUT NO! haha because your IRA is now growing taxable. For example, you start at 20 years old and when you get to 67 years old and it’s worth around $32-34 million dollars, well the government is going to take 50% at least of it which reduces you down to having $15 million only. Crazy right? I know!! I can’t believe more people don’t know this. So, you might be asking, what you can do to stop this. I’ve got good news. There is!
It is called a ROTH IRA. You cannot take any tax write-off on your contributions BUT you will get to 67 with your entire $32-34 million dollars all yours. It grows TAX-FREE! Now that is some AWESOME BIG NEWS!!! Right?!?!
It is vital at whatever age you are reading this that you start this year to contribute to a ROTH IRA. I go into great detail on this in my Retirement Planning course that is coming soon. It will help you step by step on not only how to set it up, where to set it up but most importantly what to invest it in. Because if you invest it with low return and high fees, then it will not be even close to what it could be. My numbers are all based on the average of 15% return compounding. If you go to a bank for example you might get 5-7% and then high fees that reduce your earnings year over year. This is not good.
I will show you who to go to, how to set it up, and what to invest in. It’s really super simple and easy. Of course, the first step to real wealth is getting out of Debt. That is why my first course is all about building and laying that foundation. I step you through a simple plan to get you out of personal consumer debt. I also advise you on how to handle retirement during this phase. Me and my team will walk through step by step with you through each phase of SpendPower till you to achieve SpendPower and level up into VIP Status where we have advanced courses that will help you speed up your wealth, retirement, and so much more. This is some fun stuff. For sure some hard work and breaking new ground, but worth it! You will never be the same.
PS. Have you checked out our Online Course to help you not only become debt-free but also start learning how to build wealth? Check out The Ultimate Guide to Foundational Wealth by clicking here