Graham Stephan explains how investing just $12 a day in a Roth IRA can potentially make you a tax-free millionaire. He emphasizes the importance of starting young due to the power of compound interest and breaks down the Roth IRA, including its benefits and rules. He suggests investing in index funds or stocks like Facebook, Amazon, Apple, Netflix, and Tesla within the Roth IRA for potentially higher returns. He also highlights the importance of following the contribution limits and withdrawal rules to maximize the tax-free benefits. Finally, he encourages viewers to take action now to set up a comfortable retirement.
Here are the key facts extracted from the text:
1. A Roth IRA is an individual retirement account.
2. You can open a Roth IRA account online through websites like Vanguard, Fidelity, or Charles Schwab.
3. The annual contribution limit for a Roth IRA is $6,000 if you're under 50 years old, and $7,000 if you're over 50.
4. Money deposited into a Roth IRA can grow entirely tax-free.
5. You can withdraw your original contributions from a Roth IRA at any time without penalty or taxes.
6. To open a Roth IRA, you need to be under 18, you'll need a parent to co-sign with you, and you'll need some sort of earned income.
7. The process of opening a Roth IRA should take around 10-20 minutes and can be done mostly online.
8. A Roth IRA is not an investment itself, but rather an account for you to invest your money in.
9. You can invest in individual stocks or a broad index fund within a Roth IRA.
10. Historically, the stock market has seen an average annualized return of around 7% over the long term.
11. If you make over $120,000 per year, your contributions to a Roth IRA may be phased out.
12. If you take out any profit from a Roth IRA before the age of 59 1/2, you'll have to pay a 10% penalty on that money plus pay taxes on the profit.
13. You can invest as little as $12 a day, or $360 per month, in a Roth IRA and potentially become a tax-free millionaire over time.
14. Consistently investing $360 per month over 41 years with an average rate of return of 7% can result in over $1 million in tax-free savings.