Nobody can become financially successful overnight. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking the bold steps we need in other to reach our goals.
I think it's not always about fear, Sometimes realistic factors discourage people from reaching their goals in life. For instance, I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value
@@raychristopher7797 This is the problem! Most times people with little or no knowledge of the stock market try investing by themselves. It once happened to me, then I learned my lesson and contacted a US-based finance consultant by name *PRISCILLA DIANE AIVAZIAN* and everything changed. I started enjoying huge returns from my investment.
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. Compounding is the process of earning interest on your initial investment, as well as on the interest that investment earns. This means that over time, your investment can grow exponentially. So the earlier you start investing, the more time your investment has to grow through compounding
Nobody knows anything you need to create your own process, manage risk and stick to the plan, through thick or thin while also continuously learning from mistakes and improving.
Yo Andrei! You forgot to mention the most important benefit of the Roth IRA and that is the growth/interest on your contributions is tax free! Also you spoke about the income limit for Roth but again forgot to mention the "backdoor Roth" which bypasses the limit rule! The average Joe does not know a lot about finances in general, don't give them half baked stories bro! Roth is the only investment vehicle where your growth is tax free unlike your brokerage account at Robinhood.
Ok a bit confused. I took a traditional IRA vs a Roth due to my joint income with the wife. We cannot contribute to Roth due to income. That being said, I’ve always understood you cannot remove anything from the IRA’s without getting a penalty. Also when you remove (like me) from the traditional IRA you will get taxed, albeit when I remove it I wouldn’t be working therefore my tax bracket would be much lower than it is now, hence the tax benefit Am I right so far?
@Reed Lambier I think this Russian and Graham Stephan are both bothersome, but I enjoy watching their videos for some reason, and they've both been highly informative. EDIT: Actually, I've come back about an hour later to edit this comment to say that...I like Graham Stephan more because he has a cat. :3
Graham Stephen has very little of his wealth in a Roth because of all the things wrong with a Roth, mostly the contribution limit. Graham is making far more money with his money by not obsessing over his Roth account. If you want to retire young, you don't lock your wealth in an age restricted account. Investing wisely with after tax income is how the wealthy become wealthy.
Also, if your income is above the cut off limits, you can do a "post tax IRA" which means you open a traditional IRA and do not take the tax deduction, then you immediately convert to a Roth IRA. Its what's called the backdoor IRA. Perfectly legal in the tax code.
Definitely not the most comprehensive video I've seen explaining forms of IRA's, plenty of important benefits and key information left out... To viewers, remember to do your own research always! Major points to clear up: Self Employed folks CAN have a 401k... it's called a Solo 401k. Most people actually CAN write off their IRA contributions... and their Solo 401k ones too. And you actually can convert Traditional IRA contributions into your Roth IRA over a 5 year waiting period and have them be eligible to withdraw FULLY tax free. Plenty of things to learn about how to take advantage of accounts like these, and it's easy to dismiss them as too complicated at first. Felt the need to explain for anybody feeling confused by this video!
Contribution limit can be over come by mega Roth IRA conversion - example you have $1MM in a 401k, you can live this over to your Roth to avoid RMD and you can control the income taxes on it based on how much you move over at any given time. Say you have $100k savings, you could live off that, your net income is zero and you could move $78k over in be a 12% tax bracket
This video has terrible advice. He has a very specific situation (saving for a house) and fails to mention the HUGE gains from untaxed gains of a Roth IRA.
He doesn't appear to be giving advice. As the title says he is just overviewing/teaching about each thing and saying why he isn't in his specific situation using a Roth IRA. I will also say that as the F.I.R.E movement gains more traction this information becomes more useful to more people than say 20-30 years ago.
Roth IRA isn't really that good. You're really saying you're going to retire at 59.5 years of age. Good luck because we'll most likely be sick by that age. At least 90% of Americans have significant health issues by then. Plus Roth IRA caps at $6k/year which is a joke. I could throw $20k into a taxable account and make more than people with gains from a Roth IRA despite being untaxed.
Eh I'm torn, recently been questioning the IRA. There is major opportunity cost with not being able to access the funds without penalty. Also inability to collateralize for loans is definitely an issue. The tax savings are nice, but you are basically getting paid for the inconvenience of not being able to use your money. Whether that's worth it or not depends on your goals and life. That said if I had an employer match I would aim to max it out since that's free money.
This video is a word salad of financial terms while leaving out important information like how people over the income limit can very easily contribute using the backdoor method.
I get what you're saying about the terms, like many people might not even know what CDs or money market accounts are. But backdoor could probably be a video all on its own, so I can't imagine fitting that into this too. It's definitely a video that I'd love to see even though I'm not currently fortunate enough to be in a situation where I would need it lol.
@@ShirtlessSimonCowell backdoor could have easily been part of this video but he spouts on with so much nonsensical gibberish that he uses up 14 minutes of misinformation and missing information that he could have said in 5 minutes.
@@AndreiJikh I would say if you opened a Roth with the main and only goal being earning 10k in gains to use TAX free for a down payment, a great idea. Assuming your saving for retirement as well.
Do you have to pay taxes when you put it into your first house? I know you wouldn't have to on contributions, but do they tax gains that go into the house?
You've got some misconceptions on Roth IRAs. In your example where you wanted to retire early, you could either take distributions as SEPP (substantially equal periodic payments) for no penalties but you have to comit to that distribution scheme for 5+ years. Or as you mentioned you can withdraw your basis contributions. Also the 122k income limit to contribute is not per income source, it's total. However if you're employed you can still back door 401k rollover funds into them. Also, no employer matches IRA controutions or offers an IRA, employers offer and match 401Ks which are similar and also come in Roth and non Roth varieties. Lastly the 0% capital dividends rate you mentioned is when your total income is below the quoted figure not just your capital gains income.
Thank you. I was hoping someone would mention this. Also, as a self employed individual, he would be able to open solo 401k or Roth 401k to contribute more income. If always not smart to pay more in tax than you have to. In most cases, even FIRE, you should only use a taxable brokerage account if you've exhausted your other tax deferred options imo.
122K is the beginning of the phase out range, not the limit. the limit is 137K for 2019 for single people. you can contribute to your 401K to adjust your income to keep you under either of these limits. If someone makes so much money that going down to 122-137K isn't able to support their lifestyle then none of this should really benefit you.
@@TIB1973 Excellent points, the 6k contribution limit is phased out between 122 and 137k. And you could make 141k, put 19k in 401k and free yourself up to still put in your full 6k in Roth IRA.
This video rambles on and on and doesn’t get to the point. Your logic about not being able to use the Roth IRA as collateral should be in the first 5 minutes.
This is his style of making videos. Obviously there are people who enjoy it since his channel is growing fast. Instead of commenting this unsubscribe and just watch graham stephen. To be honest I enjoy this style of video over graham stephen. To me graham is very unlikeable and smug in his videos.
for real this guy just wastes our time because he doesn't get to the point quick enough instead he tries too hard to be funny. my guess is he's just another greedy youtuber aiming for a longer video just for the revenue.
I can't get over how smooth your videos are... from editing to speech, from intro to outro - it's insane! Keep up the amazing work. You clearly put in a LOT of effort into these videos.
Thank you so much! I should probably focus on putting out more videos but I have so much fun obsessing over every little detail that I literally can't make more than 2 videos a week at this time lol
We have been thinking the same thing. If you watch TH-cam enough, and you play this video on mute. You still see all the smooth you write about. It captures your attention without the use of sound.
@@AndreiJikh But you can take out your contributions into the Roth without penalty or taxes whenever you'd like. So if you needed the cash at some point you'd still be able to pull anything other than the gains. The tax advantage out weighs the liquidity of the gains for me.
“I think we’re all replaceable really, and I would probably take my chances doing what I love and failing at that than work a job I don’t particularly like until I’m 60 and possibly getting fired for it.” Love how you make it clear for me... appreciate this. If you could please make a playlist of videos about filing taxes for stocks. It’ll be helpful for people who don’t speak English well like me.
All I know is that for someone who vaguely knows your discussions I know a few things. 1. Videos are entertaining and keeps me listening. 2. I get an overview off main points, any in depth information I need, I should have the responsibility to go and learn about it. 3. Creating, producing, and uploading videos is not an easy task so your work is greatly appreciated! 4. You make regular people comfortable with not knowing basic things by being very approachable and seeing it from another perspective. *I appreciate your work and will continue to watch, learn, and follow your guide to start putting my Robinhood to work for the long run. THANK YOU!
Same i earn too much that i already maxed both my tfsa and rrsp...and max both account every year on the 1th january...i use the extra money from the entire year and from the tax return i get bec i contribute in a RRSP. I put all in a non registered account or a taxable account to grow even bigger. I focus dividend portfolio in my taxable account so i when i quit my job, those dividend will no longer be taxed up to a maximum of 50000$ a year.
A Roth IRA is especially terrific if you open one in your teens or early 20's because people this age may not know what stocks or funds to invest in or don't have the sufficient capital to invest in a share or shares of said stocks (ex. google at $1000+ is a steep investment for 1 share).
your 0% tax space is actually $39,375 (long term capital gains) + $12,200 (standard deduction). Your "taxable income" is factored after the standard deduction (and any adjustments for foreign tax credit/deductible ira/HSA). So for a single person, you really have tax free income up to $51,575 per year as long as only $12,200 of that income is non-qualified income and the rest is qualified cap gains/dividends. You could earn $12,200 in REIT dividends or rent on a property. You could earn that through TH-cam, or anything really. The rest must be qualified as LTCG. If you retire early, you will only be subject to dividend taxes, since you are not selling and taking gains until you retire. You may only pay tax on roughly 10-15 years of dividends, with half those years being on a low base (compounding works mostly in the latter years). At $183,000 you are likely earning around $3,600-$6000 depending on your total yield. That is about $540-$900 /year this year. Over time that number will rise to maybe 6 or 7 times that per year by the time you have enough to quit. Even paying an extra $7000 a year in tax for only a year or two means over the course of investing you are paying probably less than $40,000 in taxes (15% cap gains rate) on this savings. In a roth account you would never be able to put enough away per year to get this back in tax savings. You are limited for $6000 this year in contributions. You can also set up a solo 401k for your youtube business and pay yourself a bit into that account for old age money. This will net you a tax deduction that can offset some of your dividend taxes.
Setting up your own business with a 401(k) is an awesome way to save money for retirement. Not only can you put aside money into a Roth 401(k) you can avoid business taxes by paying non-taxable company contributions into a traditional 401(k). If Andrei starts getting paid through TH-cam into Jikh LLC then he can pay himself a salary of $150k. That would allow him to put up to $19,500 per year into a Roth 401(k) (taxed at his normal tax rate but grows tax-free from then on) AND a $37k company contribution to a traditional 401(k) tax-free (no payroll taxes and no corporate taxes).
I think Andrei mixed up Roth IRA and 401(k) @ 11:36 ? Where he says that he would get a Roth IRA if he had an employer that would help him set one up and match his contributions. This usually, as far as I know, doesn't happen with IRAs, but it does happen with 401(k)s. Also, even if you plan to retire early, don't you still expect to be retired at 59.5 yrs old? So, if planned right, one could live off the individual brokerage until 59.5, and then also start pulling fully tax free money from the roth IRA at 59.5. You have the same spread of stocks/bonds you can invest in for both a roth ira, as an individual brokerage account, (if with same broker for both), so why not? Best case in an individual taxable brokerage: you pay taxes on long term gains (keep stocks for at least 1 yr). Best case in roth IRA: you get no taxes charged for withdrawing your contributions or your capitain gains (wait for 59.5).
@ *Maribel* you are correct as he mis-spoke about employer match to Roth IRA. And *he's dead wrong* about contributing to a Roth IRA as he should know that anyone with _too_ high of an income can still contribute via *backdoor* Roth IRA. Or he's simply ignorant about it.
People are facing a difficult retirement. and it's even harder for workers to save due to low-paying jobs, inflation, and high rents. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire in.
I feel like you think that an employer-sponsored 401k is the same thing as an Individual Retirement Account (IRA), based on your cons list. By definition, there is no way an EMPLOYER can match contributions to an INDIVIDUAL account, you can however rollover funds from the employer-sponsored 401k to your IRA.
J H Roth is a type of money. Contributions to 401ks are split between pretax, after tax, and Roth contributions. Pre-tax is tax deferred until taken as a distribution, aftertax has earnings tax deferred and contributions tax free, Roth is completely tax free if qualified (59 1/2 and 5 years in plan). While your employer is matching your contribution of choice, the match they provide has to be pretax money because they are not going to pay your income taxes for you. So it’s 100 percent possible they have matched your Roth contribution with pretax but just to clear things up, there is literally no possible way your employer is matching your Traditional IRA or Roth IRA as these are individual accounts not employer sponsored.
Mark Concepcion - I will find out more when i get my next paycheck/contribution. The benefits changed this year to include Roth matching. Have no idea how it works but I max out every matching opportunity. They are also matching my HSA contributions as well up to a certain amount.
You mentioned that one of the reasons you don’t invest within an IRA is that you plan to retire early but couldn’t you still retire early with an IRA but only live off of principle balance withdrawals? By the time you retire you should have a ton of principle and everything you don’t withdrawal will still continue to grow.
Dakota Brown I have a 403B with my first full-time job, a 401k with my 2nd full time job, and a Roth IRA, and a brokerage. I match contributions to my 403b and 401k, max out my Roth, and whatever’s left goes into a brokerage account.
I think you just like pay taxes. You could get a personal 401k and contribute a boat load tax deferred. And there is always the Roth Coversion ladder. I prefer my avocado toast tax free. So I am Roth 401k and Roth IRA all the way.
I didn't really get the video about if I should get a Roth IRA at 21 but the avocado toast makes sense lml 😂 I absolutely love avocado toast I would like it tax free too
@@christengardner4780 Avacodo toast is an joke made popular by Stephen Graham - at least that's where I heard it first. Andre has added a bit of Stephen's style although his content is a bit different.
Exactly a Roth IRA is one of the best wealth building tools in the game it isn’t a debate but it has Been proven over and over and over and over again, dividends,capital gains,interest,and time are money’s best friends smart man strictly Roth all the way for me too
Andrei, thank you so much for this video. I tried talking to my friends, family, and co-workers about how I planned on retiring in my early 40s and they all laughed at me. I see how miserable people are about relying so much on their 401Ks and working a job they hate that it made me realize that I need to invest and save at an early age so I can enjoy life at a young age. Society has this idea that we HAVE to work until we are in our 60s because their parents did and their parents parents did, but like you said, gone are those days. Thanks again for this dude! Also, in reality, what is a good number to shoot for when you can say "Today is the today I can pull my funds and live with what I invested"? Keep up the content!
I like how you gave us a entrepreneur perspective I fully understood your point of view thanks 👍🏼I don’t plan on retiring at old age so I won’t get one
That was fun. Andrei is right. If you don't pay significant taxes and you don't expect to pay significant taxes in the future and you don't want to participate in a program that lets you avoid paying taxes on your investments (because you don't anticipate having to pay taxes), and you don't want to save for retirement, there is no reason to use any kind of tax-deferred savings vehicle.
This is pretty bad advice. I would recommend maxing a ROTH for at least 5 years, especially early in your career and in your investment journey. You can later on put money in a taxable account to "bridge the gap" between your "early retirement age" and 59.5 years old if necessary and if you have sufficient income to do so. My advice would be to max-match employer 401k if possible, max Roth IRA, and max an HSA for the first 5 years or so, and put any extra into a taxable. After that, if you think you can retire early, evaluate how much in a taxable you will need to do so in relation to your other accounts in order to bridge the gap. Theoretically, you can just draw down your taxable principle and your contribution amount to your 401k to bridge the gap before 59.5-65 years old. The benefits of the Roth and HSA early on are that they grow tax free so the longer the money is in there, the bigger the benefit. If you do it as early as possible just after getting your first job, you would theoretically be a young, healthy person that is earlier in their career and making less money, and thus in a lower bracket while accumulating, so the lower tax burden would matter a whole lot less. . . Other substantial benefits include no RMDs, and the ability to convert your HSA to do whatever you want to with it after the age of 65. (also, you needed a High Deductible Health Plan to contribute to an HSA, but this is relatively easy to do when you are in your 20s and healthy, and later on, you can switch over to a "regular" health plan when you need it such as if having children or if you develop health issues later on. You can still use your HSA funds for qualified medical expenses later on in your career even after you switch from a high deductible plan.)
Daniel Cluley question, where do you recommend getting a Roth IRA? I’ve heard many places and I was planning to go to navy fed, what do you think? And can you please elaborate on maxing out on the Roth?
@@Juanchoo_133 You can create a Roth at many different brokerage houses. I would say just go to one of the big-boys who have good websites and just went to $0 commission such as Fidelity, Scwab, TDAmeritrade, Merrill, etc. By "maxing" I mean putting in the maximum allowable limit of earned income per year. Currently it is $6000 in earned income per year if you are below 50 years old and $7000 if you are 50+. There are also income limits on ability to contribute. If your Modified Adjusted Gross Income is over $122,000, then you will have a limit on your contributions (most of us probably don't have to worry about that when starting out).
Daniel Cluley sweet, thanks for the help. based on your experience, do you see your Roth grow a good amount or do you have it more on the conservative side ?
@@Juanchoo_133 Whether someone else invests conservatively or aggressively should have no bearing on how you should invest. They may have a different risk tolerance and or are close or far away from their retirement "number" and thus invest accordingly. S&P 500 returned *31%* in 2019, *-4.4%* in 2018. . If you have access to the Thrift Saving Plan and are in BRS you should contribute at least 5% of income to TSP.
Al Rocky no yeah I understand, I just wanted to get a perspective from someone to see how they were doing based on their experience. I currently have a federal government job and they offered TSP. I barely started to get really know it about a year and a half ago just from asking co workers and it really does make your money grow, currently put in 13% and they match 5% so hoping to see it grow more! Thanks for the advice!
I'm not a professional investor, BUT... 1. Who cares about the tax write off, wouldn't that be peanuts compared to future growth? 2. Nobody opens a ROTH for collateral on loans. It's a RETIREMENT account. Despite that, you could still withdraw your contributions if need be. 3. What? If you don't have access to a 401k that's a good reason not to have a ROTH IRA? Did I hear that right? That makes no sense whatsoever. 4. You don't want to retire at 60? Sounds good when you're young and in good health, but you will have a different attitude when that day comes. Especially when your carefree sense of immortality is gone and replaced with urgency of how you're spending your time. It's great if you want to work, but nobody wants to be forced to work. Congratulations on your view count but your message is disingenuous to your viewers.
After a few years you’ll be able to withdraw your Roth IRA at a 10% fee and no tax on gains. Meanwhile if you sold you stock you would pay about 15-35% in gain tax.
You can actually withdraw contributions at any time from a Roth IRA without penalty. There is no taxation on capital gains when you take money out in retirement.
The only caveat is to make sure you only take out what you need. If you take out $20,000 worth of contributions, only have to spend $5,000 and want to put the rest back, you can't do it all at once. It counts then toward your annual maximum contribution
Andrei, you mention you can withdraw your contributions from a ROTH IRA tax free. Your reasoning for not wanting to open one is because you want to retire maybe around 40 years old, and you can't withdraw everything from ROTH IRA until 59.5. That being said, why not open one still if you can obviously withdraw your contributions (if needed)? It seems logical. Is there a reason I am missing?
Great vid! I have a roth IRA and think it's well worth it. When the government limits your contribution, you know it's a good idea. They know taxes will be going up.
The government also limits how much you can put in a traditional What makes a Roth good for your situation is not the government limits. It's if you'll be in a higher tax bracket in retirement
Graham Stephan uses backdoor Roth IRA. If you're not using tax-advantage accounts then you are giving free money to the government. I use a traditional 401k to lower my taxable income so I pay less tax. I use the Roth IRA to avoid capital gains tax and to avoid paying tax during distribution.
Just wanted to say: this is NOT financial advice, I'm not suggesting you should not have a Roth IRA, I certainly wish I got one sooner but due to financial/job circumstances, I never prioritized it. Since making this video, my circumstances have changed for the better and I created a Roth IRA, this is the video where I show you step by step how to set one up as well with the free M1 Finance app: th-cam.com/video/y2OskmB3-PY/w-d-xo.html
Hey Andrei, I know this is quite late, but as far as the income limit on the Roth you can do a backdoor which is where you simply put money into a normal IRA and then roll over to a Roth. It's basically a Roth IRA with extra steps because there is no income limit on traditional IRAs and there is no such limit on rolling over money into a Roth.
You lost me... When you took the stocks, bond, and the one dollar heart origami thingy, what happens? Is it taxed? Is it not taxed? Does it spring like a deck of cards? I am a little lost.
Finally found someone that agrees with me. Never found someone to give reasons why NOT to get a IRA. Though I will be needing my money accessible to start and keep my school running until it's self sufficient.
Better to start little by little if you’re new. Then once you’re more familiar... you can make moves haha. Don’t risk jamming 10k into a stock or etf and then a month later you leant it wasn’t the best one for you
It's as profitable as you can make it. How you distribute the funds within it is what matters. For instance, you can purchase aggressive mutual or index funds. The annual contribution limit is 6k a year though.
@@latoriamartins4643 So she doesn't take fees from the principle amount put in? Only what is earned from it? That sounds really good...I wonder if I should change advisors!
Andrei, there are a few errors in this video. Even if you are self employed, you can contribute to a solo 401k. Also there is a difference between a Roth 401k and a Roth IRA. You can and should be contributing to a Roth IRA every year if you have earned income. This is an old video so I hope you have figured this out.
I’m about to start a job with a matched 401k, and I want a Roth IRA as a supplement. What attracts me is I can withdraw my contributions if I need to, which I believe would be a better use of the money than letting it sit in a savings account. Thank you for the video, a variety of opinions only helps round the subject.
This is a little late but you pay a 10% penalty on withdrawals. This is to discourage people from borrowing from their future retirement which could end badly!
Just out of curiosity, why do you use Robinhood compared to TD Ameritrade? Especially with all the controversy surrounding Robinhood, such as the recent news of people claiming their accounts being "looted", or the difficulty to contact the broker?
I was about to make a comment about this not being introduced in the video but then I saw this comment. Sorry, but you’re incorrect. Because you don’t pay taxes up front on a traditional, Uncle Sam gets to tax the growth on the account when you withdrawal it. If you save $1,000,000 then congratulations, you now have a $350,000 tax bill. This is a huge misconception and is why you always should go with a Roth
@@dylanortiz8407 point is that the magic is compounding interest. If you were paying taxes on earned interest every year you'd lose the compounding effect. I think you missed my point entirely.
JRInTroy in a traditional, you will pay taxes on the interest that compounds. That’s why they let you make those contributions tax-free. Because they tax the growth of the account
@@dylanortiz8407 only after it has compounded interest free/when you withdrawal. It grows tax free.You get to earn interest on your interest for many years before you start getting taxed on withdrawals. It makes a big difference in your savings. Go read a book. I'm tired of the back and forth. :)
Dylan Ortiz Doesn't work that way. It's taxed at regular income that you control. No big deal. Many of you worry too much about taxes. The people that worry the most are the ones that are new at this and/or don't have much saved.
That took place some time after this video was made. In the end it's better to have an asset NOT NEEDED than not to have one at all, as long as it's not at the expense of your other primary assets.
I can't agree. I think a ROTH is the best way to go because you pay no tax on your earnings and there is no RMD. And who knows what the tax rate will be in twenty five years from now with all the dept this country has.
Traditional IRA: a tax sheltered account which holds pre-tax investments, Roth IRA: a tax sheltered account which holds after tax investments, brokerage account: an account in which you can hold investments that is taxable. I suggest you divide your investments evenly in all three types of accounts and continue building them up over the long haul for retirement.
REITs have huge advantages of being in a Roth IRA. First of all REITs are not qualified dividends which means you'll likely get taxed more than your standard 15% of qualified dividends from a stock such as AAPL--you get taxed at your tax bracket (in my case roughly double the tax rate of qualified dividends). However with my REITs and other high paying dividend stocks such as MO in my Roth IRA, I will owe ZERO taxes on these at retirement age so long as I've held these equities for at least 5 years in my account (whereas in a traditional IRA or traditional 401k I pay taxes when I withdraw). This includes the dividends themselves! This is a huge snownall effect espically when you get into cash secured puts or covered calls within a Roth IRA. You're saving 30% for every dollar. Secondly an employer does help you open an IRA nor do they provide any match for an IRA. This is employer sponsored 401k. In my case I get a 50% match of the maximum contribution of 19k in 2019. Third: Regarding the 122k max limit for a Roth IRA, this can be overcome with what's known as a Backdoor Roth IRA. Because a traditional IRA has no income limits, you can max the traditional IRA and convert it to a Roth IRA for the sweet tax benefits of never having to pay taxes on your dividends or capital gains.
The tax inefficiency of REITs is overblown. The reason qualified dividends from stocks are taxed at a lesser rate is because they were already taxed, as in they are double taxed: once at the corporate level, once at the investor level. REIT dividends are only taxed once, at the investor level.
Andrei your explanations were very clear when you spoke of putting things into the green box like stocks, ETFs, CDs, etc. but it all fell apart when you started talking about springs and sore hands. Sorry but your example made it far more confusing than necessary. It was interesting to hear why you personally aren't investing using a Roth IRA. It seems that could have been summed up as the age 59 requirement will be too limiting for you if you retire long before that age.
Great video as always! I don't have a Roth IRA either but to me it makes sense to get this over the traditional IRA if you do choose to get one because the goal should be to make more money as you get older not less! So you would have less of a tax implication if you go this route. Don't let society tell you that you will be making less the older you get!
Appreciate it! There's a big debate in the finance and FIRE community between the BEST option (Roth vs Traditional), with some people REALLY advocating that most of us will actually make substantially less in retirement than during our working years. Others argue the other way around, it's really fascinating. The math can really be spun to support either view point. I still haven't made up my mind
I understand this sentiment and also the reason why Roth's are so popular, but for me personally I prefer taking the tax deduction now and if I happen to make a lot more in retirement it will be a good problem to have.
rubenve79 yes I understand getting the benefits now and it’s definitely a good problem to have lol. My stance is that we don’t really know what the future holds and how much higher taxes will be in the future so getting taxed now provides less uncertainty than waiting to see where tax law will be decades from now!
@@KrystalToddCPA Yes for sure, and I actually do think that the tax rates will be higher by then. As a self-employed person I don't have much of a choice but to put it in a SEP, because the contribution limits are way higher and those work essentially the same as a traditional IRA, but I personally don't mind it.
There’s no need to have an employer to set up a Roth IRA, he’s mistakenly confusing a 401K with a Roth IRA. No employer will set up your Roth IRA for you (let alone do matching contributions to it) ...what that account would be is a 401K, an entirely different retirement, tax advantaged account. If anyone is interested in the different types of retirement accounts, I can certainly do a video on this subject. And as far as saying you can’t contribute once your income exceeds $122 k, well you could simply do a back door Roth, pay your taxes in that year rather than taking the deduction, and then allow your money to grow tax free, and withdraw it tax free as well. Please ignore this, get yourself a Roth, it is one of the best financial decisions you could ever make!
I'd be interested to see the taxation on dividends over the years. I personally think a mix between the two is best but you definitely have me thinking now if I should restructure...great content!
Lol I definitely wouldn’t if you’ve got a Roth IRA. This video is pretty misleading on the pros and cons of the different vehicles. Like how he says he’s saving for a house so he wouldn’t want to have a Roth IRA when he could literally withdrawal all of his contributions to pay for that down payment tax free. Instead, he suggests a loan against a traditional IRA is the better way to go (hint: it’s not). Keep your Roth IRA.
Meanwhile he’s going to be paying unnecessary capital gains taxes when he goes to retire if he wishes to dip into it and seems to suggest that’s a better way to go than a Roth IRA. Not to mention how he skips over another huge benefit of no RMD’s on Roths which is HUGE especially if you have a secondary standard 401k that can support you between 59.5 and 70.5 (at which point you’re required to pull money out and eat the taxes). Meanwhile you just got an extra 10 years of free growth on a Roth which is amazing if you’ve got a decent balance already.
It's possible to withdraw from an IRA from a young age without penalty by engaging in structured withdrawals that are based on your actuarial life expectancy. This is referred to as Substantially Equal Periodic Payment rule (also known as rule 72t) so you are missing out on some tax benefits here. If you're careful with rules like this, you're strictly better off maximizing tax advantaged accounts. Which kind of account depends on whether you think your tax burden is higher or lower in retirement - if you think your marginal rate is higher now you want to maximize pre-tax contributions, if you think it will be higher in retirement you want to maximize Roth contributions. You can also diversify between the two. Additionally, there are very significant loopholes that can be used to get around Roth IRA contribution income limits. The first is to make a traditional IRA contribution that you don't deduct and then convert it to a Roth. This is referred to as "backdoor Roth." The second is to make an after-tax 401k contribution and, if your employer's plan allows, you roll that over to Roth. This is referred to as the "megabackdoor Roth." I'm not an expert, but you can search for these terms to read more.
I came here to learn how to invest after listening to a guy on radio talk about the importance of investing and how he made $520,000 in 3 month from $150k, somehow this video has helped clarify some things, but I still am confused, I'm a newbie and I'm open to ideas on how to invest for retirement.
As a 1st generation investor and considering the fact that beginners are prone to mistakes I reached out to a consultant for help, as far as my journey goes, investing is much easier when you have proper guidance, since January till now, I have made at least $200,000 in profit, not much compared to the investor you mentioned but its a good start for me
@@tonimhamilton2072 200 grand is not much? I would literally kill to have that amount right now in my bank account, just kidding, congrats on your success
@@taylorgreen5908 Well I'm basically learning, so i'm still in touch with my consultant, her name is Lucy Maria Koss, you can search and connect with her on her website
Canada's Roth IRA equivalent the TFSA made 12 years later solves a lot of the issues with the Roth IRA you can withdraw your money at any age and then when you withdraw the amount you take out gets added back as contribution room the next year. So not having that age restriction is pretty great.
As someone who has never invested in a roth or anything other than a 401K this was very helpful for me. I really appreciate your content, delivered amazingly and digestible. Keep it up!
Unfortunately, some important details have been flubbed in the video. A Roth IRA is a powerful tool that you should absolutely take advantage of. Please do more research.
Thank you SOOOO much for this video. You gave me so much perspective and I think I totally relate to your retirement/saving philosophy. I love what I do for a living and I don’t think it is a career I will necessarily want to retire from.
So I have a Roth IRA, that I set up when I was in college and will eventually try and max out while I am still making under that 120,000 cap and then just let it sit and grow while I am working and planning on investing in dividends more heavily when I am actually working and making a substantial income. Is this bad thinking and should I be more focused on dividends now instead of investing in a Roth?
I think you should continue doing a Roth, and if you have money left over after maxing, then do dividends (totally opposite of what I'm doing, but my retirement goal is sooner)
@@AndreiJikh Okay, that makes sense, thank you for the response! I definitely love what I'm doing so I plan on working for a while so I feel like that makes the most sense for me. Thanks Andre!
Companies actually aren't able to match IRA contributions (Roth or traditional) directly to my knowledge... Though many offer a Roth 401(k) which is obviously very similar
You may not be able to use it as collateral for a loan, but you can use it for reserves which the lender is going to require you to have anyway. Since this fulfils your requirements for reserves, and since you can withdraw your contributions at any time to use for the loan itself, there really is very little reason to not use a Roth IRA.
@Andrei Jikh Didn't you make a video about owning a home and paying a mortgage? Saying that it wasn't a smart financial decision. I'm just wondering what made you change your mind that you stated you were saving money for a sweet real estate deal?
3:06 - That's a semantics game. - Uber is a scam; the drivers are the marks. - AirBNB is very market sensitive; if your house isn't prime real estate in a travel destination city, you can pretty much forget it.
In general, I don't understand your reasoning. Your money is not locked up in a Roth IRA since you can withdraw your contributions any time tax-free which will likely be the majority of the account. And since you love dividends, you should most definitely use a Roth IRA to house those for the tax free growth, which includes dividend payouts. The method you described about if your income is low enough and not having to pay taxes on those dividends under 38.6k limits you heavily because you may want to eventually want to get a real job or other methods that cause you to go above 38.6k. Your comment about opening a Roth IRA under certain conditions doesn't make sense. You said if your employer would help you set one up and match your contributions.. so employer sponsored plans are 401ks and they are different from a Roth IRA. You can open a Roth IRA on Fidelity or where ever right now because it's a personal retirement account.
Well, there are also Roth 401k's as well which is what I have with my employer with a 4% match. Rules are pretty similar if not the same between Roth 401 and Roth IRA.
The best thing about the Roth is you can play around in the stock market sell and buy a you want and don't have to pay no taxes on the gains. Plus I can always take out any money I put in anytime I want
Question: What about capital gain tax? If you have a 401k and don't care if you retire at 60, you are withdrawing without paying capital gains. So, Andrei, are you planning on keeping under $39,375 income to avoid that tax?? Confused. I know you don't work for an employer and would need to use a Roth account instead, so the question still applies.
I want to retire early but what is the point of putting money into an ira if they are going to tax it when I retire before 65. What is a better option? Without the taxing, why can’t I just open a regular brokerage account and invest
@@graceevans6804 You get taxed now instead of later. So if you're making 15k a year, you'll be taxed in that bracket. Then when you withdraw lets say the one million at 65, any money you put in along with interest won't be taxed anything. But I started a brokerage, I like having the option to withdraw and move money around.
@@AndreiJikh A couple points. The first is that you can set up a roth ira on Vanguard for free, but you know that already. Second is that folks like Graham can open a roth through what is called a backdoor Roth IRA. Fidelity has already institutionalized this as a service and you could do it with other platforms. The summary is that you can convert a normal ira to a roth ira, but this triggers a taxable event in which you pay taxes on your ira contributions and gains. I'd say the conversion is worth considering if you think you'll be taxed more in the future. Perhaps a backdoor roth is another topic you could cover? Anyway, great video!
Your statements on folks with high income contributing the a Roth IRA are misleading. You could do a "backdoor" conversion -- since there's no income restriction on doing non-tax deductible Traditional IRA contributions, and there's no income limit on converting aftertax contributions in a Traditional IRA to a Roth. It's certainly more nuanced and gets more complicated if you have other IRA accounts. But for many people it's much simpler than you described with the Graham Stephan example.
Sure, that's a possibility. Though it's a headache and a half. If anyone is interested in doing a conversion, I suggest them to read this article: www.marketwatch.com/story/heres-why-you-may-want-to-reconsider-doing-that-backdoor-roth-ira-conversion-2019-04-17
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Nobody can become financially successful overnight. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking the bold steps we need in other to reach our goals.
I think it's not always about fear, Sometimes realistic factors discourage people from reaching their goals in life. For instance, I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value
@@raychristopher7797 This is the problem! Most times people with little or no knowledge of the stock market try investing by themselves. It once happened to me, then I learned my lesson and contacted a US-based finance consultant by name *PRISCILLA DIANE AIVAZIAN* and everything changed. I started enjoying huge returns from my investment.
@@georgerobinson2021 Oh, that sounds good but how do I reach out to PRISCILLA DIANE AIVAZIAN?
@@raychristopher7797 Look up her name on the webpage
@@georgerobinson2021 Thank you, Going through her profile on her webpage out of curiosity, and surprisingly she seems proficient. I appreciate this.
What’s the difference between a Market Bond and a magician? A Market Bond will eventually mature and make money
Ba dum tsss
If Its name is Andrei Jikh it makes more 🤣
Two drums and a cymbal roll down a hill
Adam Tatusko I’m full of original ideas 😏
Ha!
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. Compounding is the process of earning interest on your initial investment, as well as on the interest that investment earns. This means that over time, your investment can grow exponentially. So the earlier you start investing, the more time your investment has to grow through compounding
Nobody knows anything you need to create your own process, manage risk and stick to the plan, through thick or thin while also continuously learning from mistakes and improving.
Yo Andrei! You forgot to mention the most important benefit of the Roth IRA and that is the growth/interest on your contributions is tax free! Also you spoke about the income limit for Roth but again forgot to mention the "backdoor Roth" which bypasses the limit rule!
The average Joe does not know a lot about finances in general, don't give them half baked stories bro!
Roth is the only investment vehicle where your growth is tax free unlike your brokerage account at Robinhood.
Growth is tax free? But you can't take out the money that has grown until you retire right?
@@yoyotanvir Correct. You'll get heavily penalized if you do.
yoyotanvir you can withdraw your contribution as it was already taxed, any growth cannot or penalize
@@yoyotanvir yes you can..contributions are tax free. but not earnings
Ok a bit confused. I took a traditional IRA vs a Roth due to my joint income with the wife. We cannot contribute to Roth due to income. That being said, I’ve always understood you cannot remove anything from the IRA’s without getting a penalty. Also when you remove (like me) from the traditional IRA you will get taxed, albeit when I remove it I wouldn’t be working therefore my tax bracket would be much lower than it is now, hence the tax benefit Am I right so far?
*Graham Stephan has left the chat*
😂😂
I said literally this exact thing before even clicking on the video 🤣
@Reed Lambier I think this Russian and Graham Stephan are both bothersome, but I enjoy watching their videos for some reason, and they've both been highly informative. EDIT: Actually, I've come back about an hour later to edit this comment to say that...I like Graham Stephan more because he has a cat. :3
Graham Stephen has very little of his wealth in a Roth because of all the things wrong with a Roth, mostly the contribution limit. Graham is making far more money with his money by not obsessing over his Roth account. If you want to retire young, you don't lock your wealth in an age restricted account. Investing wisely with after tax income is how the wealthy become wealthy.
@@poorleno22 check out the TH-cam movie . . . A Street Cat Named Bob 😞👍
Also, if your income is above the cut off limits, you can do a "post tax IRA" which means you open a traditional IRA and do not take the tax deduction, then you immediately convert to a Roth IRA. Its what's called the backdoor IRA. Perfectly legal in the tax code.
You should start doing podcasts! You’ve got the perfect voice for it! Could watch and listen to your stuff for hours
FOR REAL
Andrei does have a radio-quality voice and an excellent presence.
Nohomo lol
Yes yes 10,000 yes. Stonks
Agreed 🎧
Instructions unclear ... invested everything into buying decks of cards
😂
I too got confused and bought 45871 cups of Starbucks coffee
Hahaha
Yea, I got confused too... I got carpal tunnel! Please tell me why you don't have an Roth IRA? Do you have ROTH 401k?
Instructions unclear ... invested everything into bitconnect
Definitely not the most comprehensive video I've seen explaining forms of IRA's, plenty of important benefits and key information left out... To viewers, remember to do your own research always!
Major points to clear up:
Self Employed folks CAN have a 401k... it's called a Solo 401k.
Most people actually CAN write off their IRA contributions... and their Solo 401k ones too.
And you actually can convert Traditional IRA contributions into your Roth IRA over a 5 year waiting period and have them be eligible to withdraw FULLY tax free.
Plenty of things to learn about how to take advantage of accounts like these, and it's easy to dismiss them as too complicated at first.
Felt the need to explain for anybody feeling confused by this video!
Agreed. He also left out 72(t) which can be used to take money from a roth penalty free.
agreed
The Roth is amazing for its lack of mandatory distributions. The main downside is the contribution limit if you're contributing at an older age 🤷♂️
Agreed! Though I prefer to withdraw as early as possible, it's always good to have a choice and not be forced to withdraw
Contribution limit can be over come by mega Roth IRA conversion - example you have $1MM in a 401k, you can live this over to your Roth to avoid RMD and you can control the income taxes on it based on how much you move over at any given time.
Say you have $100k savings, you could live off that, your net income is zero and you could move $78k over in be a 12% tax bracket
Lee M does that work with an IRA for those of us who don't have a 401k?
Or younger age for that matter
If you are over the income limit just do a backdoor Roth contribution.
This video has terrible advice. He has a very specific situation (saving for a house) and fails to mention the HUGE gains from untaxed gains of a Roth IRA.
He doesn't appear to be giving advice. As the title says he is just overviewing/teaching about each thing and saying why he isn't in his specific situation using a Roth IRA. I will also say that as the F.I.R.E movement gains more traction this information becomes more useful to more people than say 20-30 years ago.
Roth IRA isn't really that good. You're really saying you're going to retire at 59.5 years of age. Good luck because we'll most likely be sick by that age. At least 90% of Americans have significant health issues by then. Plus Roth IRA caps at $6k/year which is a joke. I could throw $20k into a taxable account and make more than people with gains from a Roth IRA despite being untaxed.
A. He's not giving advice
B. He does mention the benefits of a Roth IRA
You might wanna watch the video
The gains aren’t that huge. Capital gains tax is 0% up to 40,000 per year.
Eh I'm torn, recently been questioning the IRA. There is major opportunity cost with not being able to access the funds without penalty. Also inability to collateralize for loans is definitely an issue. The tax savings are nice, but you are basically getting paid for the inconvenience of not being able to use your money. Whether that's worth it or not depends on your goals and life. That said if I had an employer match I would aim to max it out since that's free money.
This video is a word salad of financial terms while leaving out important information like how people over the income limit can very easily contribute using the backdoor method.
I get what you're saying about the terms, like many people might not even know what CDs or money market accounts are. But backdoor could probably be a video all on its own, so I can't imagine fitting that into this too. It's definitely a video that I'd love to see even though I'm not currently fortunate enough to be in a situation where I would need it lol.
What is this backdoor, for the Roth?
@@guillermomartin8248 You can contribute from a traditional IRA into your Roth IRA. Wealthy people do this all the time.
@@ShirtlessSimonCowell backdoor could have easily been part of this video but he spouts on with so much nonsensical gibberish that he uses up 14 minutes of misinformation and missing information that he could have said in 5 minutes.
punknhead23 yeah this guys videos are too long for just a tiny bit of info. I’m just gonna watch other channels haha
While you’re correct on using Roth as collateral on home buying, first time home buyers can use Roth for down payment on a home.
Correct, which you shouldn't do in most cases. Liquidating your ROTH is not the greatest idea unless you absolutely need to do it
@@AndreiJikh I would say if you opened a Roth with the main and only goal being earning 10k in gains to use TAX free for a down payment, a great idea. Assuming your saving for retirement as well.
Josh Pitts
Just use a savings account.
Do you have to pay taxes when you put it into your first house? I know you wouldn't have to on contributions, but do they tax gains that go into the house?
searchandverify nope
You've got some misconceptions on Roth IRAs. In your example where you wanted to retire early, you could either take distributions as SEPP (substantially equal periodic payments) for no penalties but you have to comit to that distribution scheme for 5+ years. Or as you mentioned you can withdraw your basis contributions. Also the 122k income limit to contribute is not per income source, it's total. However if you're employed you can still back door 401k rollover funds into them. Also, no employer matches IRA controutions or offers an IRA, employers offer and match 401Ks which are similar and also come in Roth and non Roth varieties. Lastly the 0% capital dividends rate you mentioned is when your total income is below the quoted figure not just your capital gains income.
And if you're married, filing jointly, that income limit is $203k before you become ineligible.
Damn, Alex, you, like, know some shit!
Thank you. I was hoping someone would mention this. Also, as a self employed individual, he would be able to open solo 401k or Roth 401k to contribute more income. If always not smart to pay more in tax than you have to. In most cases, even FIRE, you should only use a taxable brokerage account if you've exhausted your other tax deferred options imo.
122K is the beginning of the phase out range, not the limit. the limit is 137K for 2019 for single people. you can contribute to your 401K to adjust your income to keep you under either of these limits. If someone makes so much money that going down to 122-137K isn't able to support their lifestyle then none of this should really benefit you.
@@TIB1973 Excellent points, the 6k contribution limit is phased out between 122 and 137k. And you could make 141k, put 19k in 401k and free yourself up to still put in your full 6k in Roth IRA.
This video rambles on and on and doesn’t get to the point. Your logic about not being able to use the Roth IRA as collateral should be in the first 5 minutes.
yeah i got lost with the card tricks
Yeah, I think Andrei need to improve here with not getting to the point. It's rather annoying. And that's why I prefer Graham Stephan videos.
I don't know but that's what makes him enjoyable and entertaining to watch
This is his style of making videos. Obviously there are people who enjoy it since his channel is growing fast. Instead of commenting this unsubscribe and just watch graham stephen. To be honest I enjoy this style of video over graham stephen. To me graham is very unlikeable and smug in his videos.
for real this guy just wastes our time because he doesn't get to the point quick enough instead he tries too hard to be funny. my guess is he's just another greedy youtuber aiming for a longer video just for the revenue.
I can't get over how smooth your videos are... from editing to speech, from intro to outro - it's insane!
Keep up the amazing work. You clearly put in a LOT of effort into these videos.
Thank you so much! I should probably focus on putting out more videos but I have so much fun obsessing over every little detail that I literally can't make more than 2 videos a week at this time lol
Andrei Jikh What software do you use?
Man crush jk lol
We have been thinking the same thing. If you watch TH-cam enough, and you play this video on mute. You still see all the smooth you write about. It captures your attention without the use of sound.
@@travelingkaspersworld4096 Mute is a good idea because the content is misinforming and sorely lacking crucial info.
You might as well max out the Roth then put the rest in another account.
Hence if I was making more money, I'd do it for sure. Maybe in a year if youtube starts really taking off :D
Investing Sensei what about 401k?
@@AndreiJikh But you can take out your contributions into the Roth without penalty or taxes whenever you'd like. So if you needed the cash at some point you'd still be able to pull anything other than the gains. The tax advantage out weighs the liquidity of the gains for me.
Brodee Bell if you can afford it
Andrei Jikh this aged well
“I think we’re all replaceable really, and I would probably take my chances doing what I love and failing at that than work a job I don’t particularly like until I’m 60 and possibly getting fired for it.”
Love how you make it clear for me... appreciate this.
If you could please make a playlist of videos about filing taxes for stocks. It’ll be helpful for people who don’t speak English well like me.
All I know is that for someone who vaguely knows your discussions I know a few things.
1. Videos are entertaining and keeps me listening.
2. I get an overview off main points, any in depth information I need, I should have the responsibility to go and learn about it.
3. Creating, producing, and uploading videos is not an easy task so your work is greatly appreciated!
4. You make regular people comfortable with not knowing basic things by being very approachable and seeing it from another perspective.
*I appreciate your work and will continue to watch, learn, and follow your guide to start putting my Robinhood to work for the long run.
THANK YOU!
I max out on Roth IRA every year. If i need the money than just take out the contribution amount, if not, let it grow for 30 years
Same i earn too much that i already maxed both my tfsa and rrsp...and max both account every year on the 1th january...i use the extra money from the entire year and from the tax return i get bec i contribute in a RRSP. I put all in a non registered account or a taxable account to grow even bigger. I focus dividend portfolio in my taxable account so i when i quit my job, those dividend will no longer be taxed up to a maximum of 50000$ a year.
A Roth IRA is especially terrific if you open one in your teens or early 20's because people this age may not know what stocks or funds to invest in or don't have the sufficient capital to invest in a share or shares of said stocks (ex. google at $1000+ is a steep investment for 1 share).
VTSAX, Fidelity zero funds. I don't think it takes much research to find these.
Fractional shares my guy
"You can fail at what you don't want to do, so you might as well take a chance at something you love." - Jim Carey #Motivational
your 0% tax space is actually $39,375 (long term capital gains) + $12,200 (standard deduction). Your "taxable income" is factored after the standard deduction (and any adjustments for foreign tax credit/deductible ira/HSA). So for a single person, you really have tax free income up to $51,575 per year as long as only $12,200 of that income is non-qualified income and the rest is qualified cap gains/dividends. You could earn $12,200 in REIT dividends or rent on a property. You could earn that through TH-cam, or anything really. The rest must be qualified as LTCG.
If you retire early, you will only be subject to dividend taxes, since you are not selling and taking gains until you retire. You may only pay tax on roughly 10-15 years of dividends, with half those years being on a low base (compounding works mostly in the latter years). At $183,000 you are likely earning around $3,600-$6000 depending on your total yield. That is about $540-$900 /year this year. Over time that number will rise to maybe 6 or 7 times that per year by the time you have enough to quit. Even paying an extra $7000 a year in tax for only a year or two means over the course of investing you are paying probably less than $40,000 in taxes (15% cap gains rate) on this savings. In a roth account you would never be able to put enough away per year to get this back in tax savings. You are limited for $6000 this year in contributions.
You can also set up a solo 401k for your youtube business and pay yourself a bit into that account for old age money. This will net you a tax deduction that can offset some of your dividend taxes.
Setting up your own business with a 401(k) is an awesome way to save money for retirement. Not only can you put aside money into a Roth 401(k) you can avoid business taxes by paying non-taxable company contributions into a traditional 401(k). If Andrei starts getting paid through TH-cam into Jikh LLC then he can pay himself a salary of $150k. That would allow him to put up to $19,500 per year into a Roth 401(k) (taxed at his normal tax rate but grows tax-free from then on) AND a $37k company contribution to a traditional 401(k) tax-free (no payroll taxes and no corporate taxes).
I think Andrei mixed up Roth IRA and 401(k) @ 11:36 ? Where he says that he would get a Roth IRA if he had an employer that would help him set one up and match his contributions. This usually, as far as I know, doesn't happen with IRAs, but it does happen with 401(k)s.
Also, even if you plan to retire early, don't you still expect to be retired at 59.5 yrs old? So, if planned right, one could live off the individual brokerage until 59.5, and then also start pulling fully tax free money from the roth IRA at 59.5. You have the same spread of stocks/bonds you can invest in for both a roth ira, as an individual brokerage account, (if with same broker for both), so why not? Best case in an individual taxable brokerage: you pay taxes on long term gains (keep stocks for at least 1 yr). Best case in roth IRA: you get no taxes charged for withdrawing your contributions or your capitain gains (wait for 59.5).
@ *Maribel* you are correct as he mis-spoke about employer match to Roth IRA. And *he's dead wrong* about contributing to a Roth IRA as he should know that anyone with _too_ high of an income can still contribute via *backdoor* Roth IRA. Or he's simply ignorant about it.
This video should be entitled, "How to take a subject that should take 3 minutes to explain and turn it into a ten minute, quite boring, tutorial."
Wouldn't tag as well though, thanks for the suggestion! I'll consider it in the future 😅
People are facing a difficult retirement. and it's even harder for workers to save due to low-paying jobs, inflation, and high rents. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire in.
I feel like you think that an employer-sponsored 401k is the same thing as an Individual Retirement Account (IRA), based on your cons list. By definition, there is no way an EMPLOYER can match contributions to an INDIVIDUAL account, you can however rollover funds from the employer-sponsored 401k to your IRA.
my employer is matching both 401k and Roth...
J H
Roth is a type of money. Contributions to 401ks are split between pretax, after tax, and Roth contributions. Pre-tax is tax deferred until taken as a distribution, aftertax has earnings tax deferred and contributions tax free, Roth is completely tax free if qualified (59 1/2 and 5 years in plan). While your employer is matching your contribution of choice, the match they provide has to be pretax money because they are not going to pay your income taxes for you. So it’s 100 percent possible they have matched your Roth contribution with pretax but just to clear things up, there is literally no possible way your employer is matching your Traditional IRA or Roth IRA as these are individual accounts not employer sponsored.
Mark Concepcion - I will find out more when i get my next paycheck/contribution. The benefits changed this year to include Roth matching. Have no idea how it works but I max out every matching opportunity. They are also matching my HSA contributions as well up to a certain amount.
You mentioned that one of the reasons you don’t invest within an IRA is that you plan to retire early but couldn’t you still retire early with an IRA but only live off of principle balance withdrawals? By the time you retire you should have a ton of principle and everything you don’t withdrawal will still continue to grow.
Dakota Brown I have a 403B with my first full-time job, a 401k with my 2nd full time job, and a Roth IRA, and a brokerage. I match contributions to my 403b and 401k, max out my Roth, and whatever’s left goes into a brokerage account.
I think you just like pay taxes. You could get a personal 401k and contribute a boat load tax deferred.
And there is always the Roth Coversion ladder.
I prefer my avocado toast tax free. So I am Roth 401k and Roth IRA all the way.
Works for most people in their situation, just not for mine right now, enjoy the avocado juice 😂
I didn't really get the video about if I should get a Roth IRA at 21 but the avocado toast makes sense lml 😂 I absolutely love avocado toast I would like it tax free too
@@christengardner4780
Avacodo toast is an joke made popular by Stephen Graham - at least that's where I heard it first. Andre has added a bit of Stephen's style although his content is a bit different.
Exactly a Roth IRA is one of the best wealth building tools in the game it isn’t a debate but it has Been proven over and over and over and over again, dividends,capital gains,interest,and time are money’s best friends smart man strictly Roth all the way for me too
the subtle finger roll with the deck of cards...
+1 (3*-*2-1*) 2--0,0-*1-7'"4"1
W*h*a*t*s*s*a*p
,
Dude. I'm always whatching meet Kevin lol and graham, but this channel is def top 3.
Thanks Alex! That's a good company to be in top 3 with :D
Much simpler. Traditional and Roth IRA, 401k, etc....are vehicles to save/invest within with your investments of choice.
Andrei, thank you so much for this video. I tried talking to my friends, family, and co-workers about how I planned on retiring in my early 40s and they all laughed at me. I see how miserable people are about relying so much on their 401Ks and working a job they hate that it made me realize that I need to invest and save at an early age so I can enjoy life at a young age. Society has this idea that we HAVE to work until we are in our 60s because their parents did and their parents parents did, but like you said, gone are those days. Thanks again for this dude!
Also, in reality, what is a good number to shoot for when you can say "Today is the today I can pull my funds and live with what I invested"? Keep up the content!
Watched many videos but could not get a grasp of IRAs. Your style of presentation and the banter is quite interesting.
I loved the analogy of putting things into the deck of cards, and the tricks that went along with it.
I like how you gave us a entrepreneur perspective I fully understood your point of view thanks 👍🏼I don’t plan on retiring at old age so I won’t get one
The drawbacks start at 8:07 (for when I need to refer back to this)
That was fun. Andrei is right. If you don't pay significant taxes and you don't expect to pay significant taxes in the future and you don't want to participate in a program that lets you avoid paying taxes on your investments (because you don't anticipate having to pay taxes), and you don't want to save for retirement, there is no reason to use any kind of tax-deferred savings vehicle.
This is pretty bad advice. I would recommend maxing a ROTH for at least 5 years, especially early in your career and in your investment journey. You can later on put money in a taxable account to "bridge the gap" between your "early retirement age" and 59.5 years old if necessary and if you have sufficient income to do so.
My advice would be to max-match employer 401k if possible, max Roth IRA, and max an HSA for the first 5 years or so, and put any extra into a taxable. After that, if you think you can retire early, evaluate how much in a taxable you will need to do so in relation to your other accounts in order to bridge the gap.
Theoretically, you can just draw down your taxable principle and your contribution amount to your 401k to bridge the gap before 59.5-65 years old.
The benefits of the Roth and HSA early on are that they grow tax free so the longer the money is in there, the bigger the benefit. If you do it as early as possible just after getting your first job, you would theoretically be a young, healthy person that is earlier in their career and making less money, and thus in a lower bracket while accumulating, so the lower tax burden would matter a whole lot less. . .
Other substantial benefits include no RMDs, and the ability to convert your HSA to do whatever you want to with it after the age of 65. (also, you needed a High Deductible Health Plan to contribute to an HSA, but this is relatively easy to do when you are in your 20s and healthy, and later on, you can switch over to a "regular" health plan when you need it such as if having children or if you develop health issues later on. You can still use your HSA funds for qualified medical expenses later on in your career even after you switch from a high deductible plan.)
Daniel Cluley question, where do you recommend getting a Roth IRA? I’ve heard many places and I was planning to go to navy fed, what do you think? And can you please elaborate on maxing out on the Roth?
@@Juanchoo_133 You can create a Roth at many different brokerage houses. I would say just go to one of the big-boys who have good websites and just went to $0 commission such as Fidelity, Scwab, TDAmeritrade, Merrill, etc.
By "maxing" I mean putting in the maximum allowable limit of earned income per year. Currently it is $6000 in earned income per year if you are below 50 years old and $7000 if you are 50+. There are also income limits on ability to contribute. If your Modified Adjusted Gross Income is over $122,000, then you will have a limit on your contributions (most of us probably don't have to worry about that when starting out).
Daniel Cluley sweet, thanks for the help. based on your experience, do you see your Roth grow a good amount or do you have it more on the conservative side ?
@@Juanchoo_133 Whether someone else invests conservatively or aggressively should have no bearing on how you should invest. They may have a different risk tolerance and or are close or far away from their retirement "number" and thus invest accordingly. S&P 500 returned *31%* in 2019, *-4.4%* in 2018.
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If you have access to the Thrift Saving Plan and are in BRS you should contribute at least 5% of income to TSP.
Al Rocky no yeah I understand, I just wanted to get a perspective from someone to see how they were doing based on their experience. I currently have a federal government job and they offered TSP. I barely started to get really know it about a year and a half ago just from asking co workers and it really does make your money grow, currently put in 13% and they match 5% so hoping to see it grow more! Thanks for the advice!
As brilliant and smart as he is. I am really surprised that he does not quite disappointing.
I'm not a professional investor, BUT...
1. Who cares about the tax write off, wouldn't that be peanuts compared to future growth?
2. Nobody opens a ROTH for collateral on loans. It's a RETIREMENT account. Despite that, you could still withdraw your contributions if need be.
3. What? If you don't have access to a 401k that's a good reason not to have a ROTH IRA? Did I hear that right? That makes no sense whatsoever.
4. You don't want to retire at 60? Sounds good when you're young and in good health, but you will have a different attitude when that day comes. Especially when your carefree sense of immortality is gone and replaced with urgency of how you're spending your time. It's great if you want to work, but nobody wants to be forced to work.
Congratulations on your view count but your message is disingenuous to your viewers.
Dude I love your videos, but what else? Your watch!! What kind is that?
After a few years you’ll be able to withdraw your Roth IRA at a 10% fee and no tax on gains. Meanwhile if you sold you stock you would pay about 15-35% in gain tax.
You can actually withdraw contributions at any time from a Roth IRA without penalty. There is no taxation on capital gains when you take money out in retirement.
@@karlwenzel3422 If you withdraw before retirement age you have to pay a penatly.
Dre Ster that's not right. As long as you've had your Roth for 5 years, you can withdraw contributions at any time completely tax and penalty free.
Sujay Busam send me statement were it says that
The only caveat is to make sure you only take out what you need. If you take out $20,000 worth of contributions, only have to spend $5,000 and want to put the rest back, you can't do it all at once. It counts then toward your annual maximum contribution
Andrei, you mention you can withdraw your contributions from a ROTH IRA tax free. Your reasoning for not wanting to open one is because you want to retire maybe around 40 years old, and you can't withdraw everything from ROTH IRA until 59.5.
That being said, why not open one still if you can obviously withdraw your contributions (if needed)? It seems logical. Is there a reason I am missing?
Great vid! I have a roth IRA and think it's well worth it. When the government limits your contribution, you know it's a good idea. They know taxes will be going up.
The government also limits how much you can put in a traditional
What makes a Roth good for your situation is not the government limits. It's if you'll be in a higher tax bracket in retirement
@@johngill2853 yeah i was more referring to income limits to even contribute, but i hear ya. its essentially a hedge against tax increases
@@andypehrson9316 there are income limits on traditional IRAs if you have work place plan
This dude is the best teacher I know. Never thought learning about Roth IRA would be exciting lol.
The CDs joke 😅😅Surely I'm not the only one who nearly died laughing.
😂 it's pure sorcery! I swear!
@Benzie Smith climb back under whichever dark bridge you have appeared from troll
Graham Stephan uses backdoor Roth IRA. If you're not using tax-advantage accounts then you are giving free money to the government. I use a traditional 401k to lower my taxable income so I pay less tax. I use the Roth IRA to avoid capital gains tax and to avoid paying tax during distribution.
Just wanted to say: this is NOT financial advice, I'm not suggesting you should not have a Roth IRA, I certainly wish I got one sooner but due to financial/job circumstances, I never prioritized it. Since making this video, my circumstances have changed for the better and I created a Roth IRA, this is the video where I show you step by step how to set one up as well with the free M1 Finance app: th-cam.com/video/y2OskmB3-PY/w-d-xo.html
Andrei Jikh atta boy
Hey Andrei, I know this is quite late, but as far as the income limit on the Roth you can do a backdoor which is where you simply put money into a normal IRA and then roll over to a Roth. It's basically a Roth IRA with extra steps because there is no income limit on traditional IRAs and there is no such limit on rolling over money into a Roth.
I think this is the guy who got it figured out.
LMAO
Watching this faded is nuts bro, so fun learning this way
You lost me... When you took the stocks, bond, and the one dollar heart origami thingy, what happens? Is it taxed? Is it not taxed? Does it spring like a deck of cards? I am a little lost.
Finally found someone that agrees with me. Never found someone to give reasons why NOT to get a IRA. Though I will be needing my money accessible to start and keep my school running until it's self sufficient.
I am a beginner investor and I will love to know how profitable it is....I intend to start huge, I will appreciate any clue into the market.
I have been told about this over and over again but my concern remain that how do I find one?
Better to start little by little if you’re new. Then once you’re more familiar... you can make moves haha. Don’t risk jamming 10k into a stock or etf and then a month later you leant it wasn’t the best one for you
It's as profitable as you can make it. How you distribute the funds within it is what matters. For instance, you can purchase aggressive mutual or index funds. The annual contribution limit is 6k a year though.
@@latoriamartins4643 So she doesn't take fees from the principle amount put in? Only what is earned from it? That sounds really good...I wonder if I should change advisors!
@@okayian8698 Does this mean as long as the principle amount doesn't go over $6k, you can put it into the Roth IRA
Andrei, there are a few errors in this video. Even if you are self employed, you can contribute to a solo 401k. Also there is a difference between a Roth 401k and a Roth IRA. You can and should be contributing to a Roth IRA every year if you have earned income. This is an old video so I hope you have figured this out.
I’m about to start a job with a matched 401k, and I want a Roth IRA as a supplement. What attracts me is I can withdraw my contributions if I need to, which I believe would be a better use of the money than letting it sit in a savings account. Thank you for the video, a variety of opinions only helps round the subject.
This is a little late but you pay a 10% penalty on withdrawals. This is to discourage people from borrowing from their future retirement which could end badly!
This is assuming the market doesn't tank.
Just out of curiosity, why do you use Robinhood compared to TD Ameritrade? Especially with all the controversy surrounding Robinhood, such as the recent news of people claiming their accounts being "looted", or the difficulty to contact the broker?
Whether Roth or Traditional IRA, the power of tax-free compound interest is the main advantage.
I was about to make a comment about this not being introduced in the video but then I saw this comment. Sorry, but you’re incorrect. Because you don’t pay taxes up front on a traditional, Uncle Sam gets to tax the growth on the account when you withdrawal it. If you save $1,000,000 then congratulations, you now have a $350,000 tax bill. This is a huge misconception and is why you always should go with a Roth
@@dylanortiz8407 point is that the magic is compounding interest. If you were paying taxes on earned interest every year you'd lose the compounding effect. I think you missed my point entirely.
JRInTroy in a traditional, you will pay taxes on the interest that compounds. That’s why they let you make those contributions tax-free. Because they tax the growth of the account
@@dylanortiz8407 only after it has compounded interest free/when you withdrawal. It grows tax free.You get to earn interest on your interest for many years before you start getting taxed on withdrawals. It makes a big difference in your savings. Go read a book. I'm tired of the back and forth. :)
Dylan Ortiz
Doesn't work that way.
It's taxed at regular income that you control.
No big deal.
Many of you worry too much about taxes. The people that worry the most are the ones that are new at this and/or don't have much saved.
I’m 63 shall I go with a standard brokerage account. Or which IRA. I should live till 70 easy.
Wait did I miss something? I thought you started a Roth with M1 Finance?
That took place some time after this video was made. In the end it's better to have an asset NOT NEEDED than not to have one at all, as long as it's not at the expense of your other primary assets.
I was so confused too.
I can't agree. I think a ROTH is the best way to go because you pay no tax on your earnings and there is no RMD. And who knows what the tax rate will be in twenty five years from now with all the dept this country has.
Back door roth for high income earners!
Traditional IRA: a tax sheltered account which holds pre-tax investments, Roth IRA: a tax sheltered account which holds after tax investments, brokerage account: an account in which you can hold investments that is taxable. I suggest you divide your investments evenly in all three types of accounts and continue building them up over the long haul for retirement.
REITs have huge advantages of being in a Roth IRA. First of all REITs are not qualified dividends which means you'll likely get taxed more than your standard 15% of qualified dividends from a stock such as AAPL--you get taxed at your tax bracket (in my case roughly double the tax rate of qualified dividends). However with my REITs and other high paying dividend stocks such as MO in my Roth IRA, I will owe ZERO taxes on these at retirement age so long as I've held these equities for at least 5 years in my account (whereas in a traditional IRA or traditional 401k I pay taxes when I withdraw). This includes the dividends themselves! This is a huge snownall effect espically when you get into cash secured puts or covered calls within a Roth IRA. You're saving 30% for every dollar.
Secondly an employer does help you open an IRA nor do they provide any match for an IRA. This is employer sponsored 401k. In my case I get a 50% match of the maximum contribution of 19k in 2019.
Third: Regarding the 122k max limit for a Roth IRA, this can be overcome with what's known as a Backdoor Roth IRA. Because a traditional IRA has no income limits, you can max the traditional IRA and convert it to a Roth IRA for the sweet tax benefits of never having to pay taxes on your dividends or capital gains.
The tax inefficiency of REITs is overblown. The reason qualified dividends from stocks are taxed at a lesser rate is because they were already taxed, as in they are double taxed: once at the corporate level, once at the investor level. REIT dividends are only taxed once, at the investor level.
Andrei your explanations were very clear when you spoke of putting things into the green box like stocks, ETFs, CDs, etc. but it all fell apart when you started talking about springs and sore hands. Sorry but your example made it far more confusing than necessary. It was interesting to hear why you personally aren't investing using a Roth IRA. It seems that could have been summed up as the age 59 requirement will be too limiting for you if you retire long before that age.
Great video as always! I don't have a Roth IRA either but to me it makes sense to get this over the traditional IRA if you do choose to get one because the goal should be to make more money as you get older not less! So you would have less of a tax implication if you go this route. Don't let society tell you that you will be making less the older you get!
Appreciate it! There's a big debate in the finance and FIRE community between the BEST option (Roth vs Traditional), with some people REALLY advocating that most of us will actually make substantially less in retirement than during our working years. Others argue the other way around, it's really fascinating. The math can really be spun to support either view point. I still haven't made up my mind
I understand this sentiment and also the reason why Roth's are so popular, but for me personally I prefer taking the tax deduction now and if I happen to make a lot more in retirement it will be a good problem to have.
Andrei Jikh yeah and honestly both sides have strong points so it’s ultimately what you’re comfortable with!
rubenve79 yes I understand getting the benefits now and it’s definitely a good problem to have lol. My stance is that we don’t really know what the future holds and how much higher taxes will be in the future so getting taxed now provides less uncertainty than waiting to see where tax law will be decades from now!
@@KrystalToddCPA Yes for sure, and I actually do think that the tax rates will be higher by then. As a self-employed person I don't have much of a choice but to put it in a SEP, because the contribution limits are way higher and those work essentially the same as a traditional IRA, but I personally don't mind it.
I’m 63 and want to invest in A.I. Where should I go?
He must be doing really well in life to have such a nice setup on a TH-cam income. That is really clean.
I'm super confused but if I want to retire by 40 should I do the Roth IRA? Will I be able to choose when I retire and get the money at that point?
There’s no need to have an employer to set up a Roth IRA, he’s mistakenly confusing a 401K with a Roth IRA. No employer will set up your Roth IRA for you (let alone do matching contributions to it) ...what that account would be is a 401K, an entirely different retirement, tax advantaged account. If anyone is interested in the different types of retirement accounts, I can certainly do a video on this subject. And as far as saying you can’t contribute once your income exceeds $122 k, well you could simply do a back door Roth, pay your taxes in that year rather than taking the deduction, and then allow your money to grow tax free, and withdraw it tax free as well. Please ignore this, get yourself a Roth, it is one of the best financial decisions you could ever make!
Would it be time to get out of a Roth IRA since everything seems to be crashing? Or switch to bonds?
I wouldn't change my investment strategy, just keep going consistently
I'd be interested to see the taxation on dividends over the years. I personally think a mix between the two is best but you definitely have me thinking now if I should restructure...great content!
Lol I definitely wouldn’t if you’ve got a Roth IRA. This video is pretty misleading on the pros and cons of the different vehicles. Like how he says he’s saving for a house so he wouldn’t want to have a Roth IRA when he could literally withdrawal all of his contributions to pay for that down payment tax free. Instead, he suggests a loan against a traditional IRA is the better way to go (hint: it’s not). Keep your Roth IRA.
Meanwhile he’s going to be paying unnecessary capital gains taxes when he goes to retire if he wishes to dip into it and seems to suggest that’s a better way to go than a Roth IRA. Not to mention how he skips over another huge benefit of no RMD’s on Roths which is HUGE especially if you have a secondary standard 401k that can support you between 59.5 and 70.5 (at which point you’re required to pull money out and eat the taxes). Meanwhile you just got an extra 10 years of free growth on a Roth which is amazing if you’ve got a decent balance already.
It's possible to withdraw from an IRA from a young age without penalty by engaging in structured withdrawals that are based on your actuarial life expectancy. This is referred to as Substantially Equal Periodic Payment rule (also known as rule 72t) so you are missing out on some tax benefits here. If you're careful with rules like this, you're strictly better off maximizing tax advantaged accounts. Which kind of account depends on whether you think your tax burden is higher or lower in retirement - if you think your marginal rate is higher now you want to maximize pre-tax contributions, if you think it will be higher in retirement you want to maximize Roth contributions. You can also diversify between the two.
Additionally, there are very significant loopholes that can be used to get around Roth IRA contribution income limits. The first is to make a traditional IRA contribution that you don't deduct and then convert it to a Roth. This is referred to as "backdoor Roth." The second is to make an after-tax 401k contribution and, if your employer's plan allows, you roll that over to Roth. This is referred to as the "megabackdoor Roth."
I'm not an expert, but you can search for these terms to read more.
I came here to learn how to invest after listening to a guy on radio talk about the importance of investing and how he made $520,000 in 3 month from $150k, somehow this video has helped clarify some things, but I still am confused, I'm a newbie and I'm open to ideas on how to invest for retirement.
have a goal in mind that you aim to achieve from investing and work towards that
As a 1st generation investor and considering the fact that beginners are prone to mistakes I reached out to a consultant for help, as far as my journey goes, investing is much easier when you have proper guidance, since January till now, I have made at least $200,000 in profit, not much compared to the investor you mentioned but its a good start for me
@@tonimhamilton2072 200 grand is not much? I would literally kill to have that amount right now in my bank account, just kidding, congrats on your success
@@tonimhamilton2072 Please do you mind leaving me your consultant’s contact info? or preferably I can also leave you my email if that suits you better
@@taylorgreen5908 Well I'm basically learning, so i'm still in touch with my consultant, her name is Lucy Maria Koss, you can search and connect with her on her website
Canada's Roth IRA equivalent the TFSA made 12 years later solves a lot of the issues with the Roth IRA you can withdraw your money at any age and then when you withdraw the amount you take out gets added back as contribution room the next year. So not having that age restriction is pretty great.
Here's to you Andrei hitting 100k and 1M in a year bro..
Priceless content
Thank you! for all the nerdy info.... helps more than you know. Keep up the good work. 👍
As someone who has never invested in a roth or anything other than a 401K this was very helpful for me. I really appreciate your content, delivered amazingly and digestible. Keep it up!
Appreciate it man! I try to keep it simple but sometimes people are turned off by my "analogies" haha
Unfortunately, some important details have been flubbed in the video. A Roth IRA is a powerful tool that you should absolutely take advantage of. Please do more research.
Should I still open up a ROTH IRA if I plan to make more than 137k a year in a few years?? I just learned about this and I’m bummed!
Thank you SOOOO much for this video. You gave me so much perspective and I think I totally relate to your retirement/saving philosophy. I love what I do for a living and I don’t think it is a career I will necessarily want to retire from.
So I have a Roth IRA, that I set up when I was in college and will eventually try and max out while I am still making under that 120,000 cap and then just let it sit and grow while I am working and planning on investing in dividends more heavily when I am actually working and making a substantial income. Is this bad thinking and should I be more focused on dividends now instead of investing in a Roth?
I think you should continue doing a Roth, and if you have money left over after maxing, then do dividends (totally opposite of what I'm doing, but my retirement goal is sooner)
@@AndreiJikh Okay, that makes sense, thank you for the response! I definitely love what I'm doing so I plan on working for a while so I feel like that makes the most sense for me. Thanks Andre!
5:31 lol, he trained his hand to grab “stiff decks”
I’m a few months late💀 but if IRA is just compounding, why not just buy dividend stocks with a regular account?
Companies actually aren't able to match IRA contributions (Roth or traditional) directly to my knowledge... Though many offer a Roth 401(k) which is obviously very similar
You may not be able to use it as collateral for a loan, but you can use it for reserves which the lender is going to require you to have anyway. Since this fulfils your requirements for reserves, and since you can withdraw your contributions at any time to use for the loan itself, there really is very little reason to not use a Roth IRA.
ROTH ira is great for the tax purposes and honestly thats it !
Which is definitely a good reason by itself, and I'm not opposed to the idea but I don't have one yet, maybe sometime in the near future
Do you mean, using the principal to pay any extra taxes at the time of filing and leaving the growth in the Roth IRA?
It's also a great hedge against future tax increases.
@@billh1355 this. Just look at europe.
@@billh1355 exactly lol
@Andrei Jikh Didn't you make a video about owning a home and paying a mortgage? Saying that it wasn't a smart financial decision. I'm just wondering what made you change your mind that you stated you were saving money for a sweet real estate deal?
Great video Andrei!
:)
3:06 - That's a semantics game.
- Uber is a scam; the drivers are the marks.
- AirBNB is very market sensitive; if your house isn't prime real estate in a travel destination city, you can pretty much forget it.
In general, I don't understand your reasoning. Your money is not locked up in a Roth IRA since you can withdraw your contributions any time tax-free which will likely be the majority of the account. And since you love dividends, you should most definitely use a Roth IRA to house those for the tax free growth, which includes dividend payouts. The method you described about if your income is low enough and not having to pay taxes on those dividends under 38.6k limits you heavily because you may want to eventually want to get a real job or other methods that cause you to go above 38.6k.
Your comment about opening a Roth IRA under certain conditions doesn't make sense. You said if your employer would help you set one up and match your contributions.. so employer sponsored plans are 401ks and they are different from a Roth IRA. You can open a Roth IRA on Fidelity or where ever right now because it's a personal retirement account.
K Tanner what’s wrong with it?
Well, there are also Roth 401k's as well which is what I have with my employer with a 4% match. Rules are pretty similar if not the same between Roth 401 and Roth IRA.
The best thing about the Roth is you can play around in the stock market sell and buy a you want and don't have to pay no taxes on the gains. Plus I can always take out any money I put in anytime I want
ive been training my hand to hold stiff decks since i was 13
Question: What about capital gain tax? If you have a 401k and don't care if you retire at 60, you are withdrawing without paying capital gains. So, Andrei, are you planning on keeping under $39,375 income to avoid that tax?? Confused. I know you don't work for an employer and would need to use a Roth account instead, so the question still applies.
Nice advice! I'm just starting and I agree with your retirement plan, retiring at 40 instead of 65. Dividends here I come!
I want to retire early but what is the point of putting money into an ira if they are going to tax it when I retire before 65. What is a better option? Without the taxing, why can’t I just open a regular brokerage account and invest
@@graceevans6804 You get taxed now instead of later. So if you're making 15k a year, you'll be taxed in that bracket. Then when you withdraw lets say the one million at 65, any money you put in along with interest won't be taxed anything. But I started a brokerage, I like having the option to withdraw and move money around.
So it’s pointless to put dividend stocks and ETFs inside your ROTH IRA?
That moment when Stephen Graham tells you to open a Roth IRA but Andrei says don’t 🤔
lol, I didn't say don't open one, it's just why I don't have one - and what it will take for me to get one :)
@@AndreiJikh A couple points. The first is that you can set up a roth ira on Vanguard for free, but you know that already. Second is that folks like Graham can open a roth through what is called a backdoor Roth IRA. Fidelity has already institutionalized this as a service and you could do it with other platforms. The summary is that you can convert a normal ira to a roth ira, but this triggers a taxable event in which you pay taxes on your ira contributions and gains.
I'd say the conversion is worth considering if you think you'll be taxed more in the future. Perhaps a backdoor roth is another topic you could cover? Anyway, great video!
Traditional and Roth IRA explanation made a shit ton of sense to me that thank you.
Um there was a 75 Minute ad on here. Longest I’ve seen on TH-cam ever 😂
Your statements on folks with high income contributing the a Roth IRA are misleading. You could do a "backdoor" conversion -- since there's no income restriction on doing non-tax deductible Traditional IRA contributions, and there's no income limit on converting aftertax contributions in a Traditional IRA to a Roth.
It's certainly more nuanced and gets more complicated if you have other IRA accounts. But for many people it's much simpler than you described with the Graham Stephan example.
Sure, that's a possibility. Though it's a headache and a half. If anyone is interested in doing a conversion, I suggest them to read this article: www.marketwatch.com/story/heres-why-you-may-want-to-reconsider-doing-that-backdoor-roth-ira-conversion-2019-04-17