Vanguard Roth IRA Explained For Beginners (Tax Free Millionaire)
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- Опубліковано 18 жов 2024
- Learn one of the EASIEST ways to become a millionaire by investing in a Roth IRA on Vanguard.
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In this video, I explain Vanguard Roth IRA investing at a beginner level which will help you get started on a path to become a tax-free Millionaire. The power of compound interest is such a simple way to insanely grow your money with minimal investing effort.
My schedule is always insane with freelance work, UA-cam, and everything else that life throws at me. I really love how simple and hands-off investing in a Roth IRA is. I can make my contributions, reinvest dividends, and let my money work for me. By the time I retire, my Roth IRA will have over 1.2 MILLION dollars completely TAX-FREE!
3 Reasons to Start Investing in a Roth IRA now
1. Your contributions grow TAX-FREE. I'm currently 30 years old. If I deposit the max $6,000 per year in my Roth IRA, then by the time I turn 63 years old I will have over a million dollars completely TAX-FREE. Everything in the account is 100% mine. Also, that's a $204,000 investment from me over the 33 years with around $817,000 gained in interest. INSANE!
2. You can also withdraw any of the money that you deposit (principal) into the account anytime without paying penalties or taxes. If some major life events occur and you need to pull out money that you invested (not the interest), then you can anytime!
3. Your SPOUSE can also open a Roth IRA and YOU can help contribute to it. These are individual retirement accounts and there's no such thing as a join Roth IRA. This allows you and your spouse to double your Roth IRA earnings over time.
This video specifically covers opening a Roth IRA on Vanguard, however, there are tons of alternatives like Fidelity and Charles Schwab.
The BEST time to start investing in a Roth IRA is NOW. The sooner (younger) you start, the more COMPOUND INTEREST you will earn. You will earn interest on top of interest on top of more interest, you get the picture.
MUSIC
• Nate Good - Charlie Horse
www.bensound.com/
DISCLAIMER: This video contains affiliate links. This means that if you click one of the product links and make a purchase, then I'll receive a small commission. I'm not a financial advisor and this video is meant for entertainment purposes only.
#vanguardrothira #rothira #rothiraexplained #vanguard #roth
josh thank you so much man i watched your videos for two weeks than i start to send proposals and i got my first contract before 1 week thanks man that is my first job on Upwork
That’s great to hear! Thanks for sharing and keep up the work. 💪
Another GREAT video. Thank you.
Thanks so much! Glad you enjoyed it.👍
great video ! i just turned 20 and am opening my account today
Awesome to hear that! My best advice is to stay consistent with it. Budget how much that you want to invest for the year and setup automatic investments. VTSAX has a minimum investment of $3k, but you could setup automatic investments with VTI (ETF) which has no minimum. Not financial advice btw. Just what I would personally do as a 20 year old. : )
First off, great video! I am confused on the $6k limit portion of the IRA. So, If I buy 2 stocks of VTSAX this year, does that mean I can't buy any more stocks in my IRA until the next year?
I confident this may be true, but so im guessing that if I want to invest more money on Vanguard Ill have to use a different account or something right?
Thanks, glad you enjoyed it! So, you're not limited based on shares. You're limited on how much total $$$ that you can contribute to a Roth IRA account. Since Roth IRAs are tax free accounts, the IRS placed a $6,000 limit on how much you can contribute per year.
@@heresjonny2848 You're mistaken. Current price per share of Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) is ~ $120. If you only have ~$240 of available cash in your IRA you can only purchase two shares of VTSAX. You may purchase fractions of a share in mutual/index funds too. If you have $6,000 cash in IRA you may purchase many more shares of VTSAX.
Great video! Really helped me learn a lot more on how a Roth IRA works, thank you!
Thanks Jose! Glad you enjoyed it.
@@JoshBurnsTech Hi! Why is it that when I have to put money in Vanguard Federal Market fund and its subtracted from my total contribution?
Is it really like this and should i match 100% to it?
Does this mean I still have contributions that I can withdraw 59.5 years + or like ROTH IRA is like a brokerage too
How much money should I put?
Super helpful info. Thank you for making this video!
I'm confused how you got the 8% return... Did you pick 8% out of thin air or is there some math or way/formula to arrive to what percentage return I'll get?
Thanks again for sharing your insight!
You're very welcome and glad that you enjoyed it! Most of my Roth IRA is invested in VTSAX, which has an average return of around 8% since inception (11/13/2000).
@@JoshBurnsTech aaaah gatcha! Thank you so much!
@@ricardoarevalo6946 You're welcome!
Very informing thank u!
You’re very welcome!
Do you think using a 401k for the present tax advantage can work with a Roth to give taxable and tax-free income in the future?
I personally have a 401k and a Roth IRA. My employer matches around 6% of what I contribute. I haven’t looked much into rollover from 401k to Roth IRA since I’m still working in a salaried position as well. I plan to keep contributing at least what my employer matches as long as I’m there. So to answer your question, I’m really not sure. Lol
How do I make sure dividends are reinvested? Do I click a button or is it automatically?
It’s a setting in Vanguard.
I wish I had a Roth instead of Traditional. Not worth changing now. The taxes to switch would be great on 213k.
Start conversions...
You can always start funding a new ROTH instead of putting money into your traditional account.
What about having student loans and wanting to open a ROTH IRA account?
Great question! This is not financial advice of course (have to mention that). However, I graduated with $30k in student loan debt and opened a Roth IRA. I budgeted for both, because I knew that if I told myself "I'm going to focus on paying off debt first", then I would likely waste tons of time and forfeit tons of compound interest. The longer your Roth IRA contributions grow from both compound interest and dividends, the more money you will have after turning 59 1/2.
So I am 21 and have about $6,500 in a savings account at Wells Fargo. I have a credit (started a year ago) and debit card with WF as well, with good standing credit. So I am thinking of going to Vanguard for a Roth IRA. Would it be a good idea to open the Roth IRA at Vanguard, put in like $4,000, do the VTSAX with a minimum $3000 all while keeping like 2k at Wells Fargo? Is this a good idea? I am new to this
Hey! First off, awesome that you're looking into these things at 21. I was in my mid-late 20s before I got serious about personal finance. Second, I'm not a financial advisor and you're responsible for your investment decisions (have to say that). Personally, I would definitely open a Roth IRA. If you started by depositing $4k this year and then added $3,000 annually every year (8% return) until you turn 59 1/2 then you would have right around $1 million in tax-free money. Regarding your savings account, there's definitely better options than Wells Fargo that offer higher APY. Here's a review of one that I did recently: ua-cam.com/video/JwQjYwkqfwE/v-deo.html
You're on the right track. As your income increases, you will be able to make other investments down the road as well.
@@JoshBurnsTech I am expecting to be working a decent paying job in the next two years as I finish my Associates in IT soon-ish with basically no debt (praise the lord), but for right know I am basically willing to contribute 4k for the Roth, and I won't be able to do $3k annual investment for a year or two, but defiantly can contribute like a couple hundred a month to the Roth IRA. Yeah I am learning Wells Fargo kinda sucks, but is transitioning to different banks smooth? Idk if they charge CC fees for not using them etc. Honestly looking for any advice as I am new to all of this.
@@PlanetFinesse Contributing anything you can to a Roth IRA will pay off long term. You can always increase it overtime as your income increases, etc. In terms of just switching savings accounts, definitely smooth. I'm always checking for the best high yield accounts with FDIC insurance.
@@JoshBurnsTech Okay thanks a lot man. Cheers ^-^
You’re welcome!
Wow! You really helped me :)
Glad to hear that! 😁
thank you!!!! I'm wondering why i only have a 4.7% return on my VFAIX in the past 2 years. Should I switch to VTSAX?
VFAIX is highly volatile due to the narrow focus on the financial sector. I can't tell you what to do, but I can tell you why I invest in VTSAX, VTI, and VOO. VTSAX and VTI are total market index funds. For example, there are 3731 stocks in VTSAX, whereas VFAIX only has 505 stocks. I choose to invest in VTSAX (index fund), VTI (ETF), and VOO (ETF) because they cover more stocks and are safer investments IMO. Hope this helps!
Hi! Why is it that when I have to put money in Vanguard Federal Market fund and its subtracted from my total contribution?
Is it really like this and should i match 100% to it?
Does this mean I still have contributions that I can withdraw 59.5 years + or like ROTH IRA is like a brokerage too
How much money should I put?
Ok I have a few questions. I just created my Roth Ira with vanguard and currently have 100$ in there lol. Am I correct in assuming that $100 is doing absolutely nothing because it isn't invested? Also in order for me to make the money work for me, I need to invest in an index fund like VTSAX? And finally, I can't actually invest in VTSAX unless I have $3k? If that's true should I be doing weekly contributions into my Roth Ira, or just keep the money in my bank account until I have 3k and just dump 3k into VTSAX so it's invested and starts to grow
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Vanguard Total Stock Market ETF (VTI) ~$210 share
Alternatively you may invest in the ETF version *VTI* ~$210 share. Purchasing ETFs requires you choose market or limit price. If you decide on VTSAX skip the bank and just as well deposit into Roth IRA account until you have $3,000. There are several $1,000 mutual funds you can temporary invest in until you get up to $3,000.
Is the fund he recommends still good for this year? I see this video is from last year ?
VTSAX is always one of the best total market index funds.
So when exactly do you pay the taxes for a Roth? Come Tax Season or is it immediately deducted from the contribution you make?
The money that goes into your Roth IRA is considered post-tax money, which means that you've already paid taxes on it. For example, if you use money from your salary then taxes are usually already deducted before it hits your bank account.
@@JoshBurnsTech Oh wow, OK everywhere I have read / watched on starting to invest in a Roth has done a terrible job explaining that haha
@@alkirehomevideos I'll keep that in mind when I make an updated video on Roth IRAs! 😀
@@JoshBurnsTech It could be a me problem haha, but I feel like every video I've watched mentions that the money is taxed before it enters your Roth account but makes it sound like you have to pay that tax in a separate payment prior to the money entering your account
@@alkirehomevideos It takes a while to fully understand it all. I've personally been there. haha I actually have a new video coming within the next week or two covering some of the top ETFs on Vanguard and Fidelty.
Josh,
With a vanguard target retirement Roth IRA, can you still withdrawal in case of emergencies tax free as well ? Also what are your thoughts on the that type of Roth IRA in comparison to the one you talk about here ?
You’ll be hit with a penalty if you withdraw before 59 1/2 unfortunately.
I just subscribe to your channel. The advice you give in this video is it still suitable today with the ETF you’ve mentioned??
@@JoshBurnsTech oh boy thank you .. I love it that you answered right away ❤️❤️I’m your number one follower now lol
Sorry my comment disappeared! I'm having a really weird issue with UA-cam removing some of my comments which I believe is linked to spam/fake accounts. But yes, the ETF is one of the best. I plan to create a "Top ETF" video soon as well.
I still don’t know how add money to my account
Thank you!!!!
You're welcome! 😃
What fund again for the Roth tsp ?
What’s the average returns on voo and vti?
It's only tax free if you withdrawal the money after your 59 years of age? That's what you said at 2:17 ("as long as..."). However in 9:49 you say the you can withdrawal all your money at any time without paying taxes. Or did I interpret it wrong?
You interpreted it wrong. You can withdraw the money that you contributed at anytime without paying taxes. For instance, if you put in $3,000 and it grows to $4,000, then you can take out your contribution of $3,000 leaving in the $1,000 that you gained.
@@JoshBurnsTech Thanks for the response.
No problem at all!
Does this apply for the UK as well? Or is it US only?
You would need to be living in the US with other requirements in order to qualify for a Roth IRA. www.google.com/amp/s/www.forbes.com/sites/financialfinesse/2018/07/29/working-in-the-u-s-temporarily-heres-what-you-need-to-know-about-retirement/amp/
@@JoshBurnsTech gotcha
Question can you keep your roth ira as long you want without withdrawal?
Roth IRAs do not require withdrawals until after the death of the owner. Best practice is to wait until after age 59½ to avoid taxes and penalties. www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:text=Roth%20IRAs%20do%20not%20require,required%20from%20designated%20Roth%20accounts.
Ty for ur explanation, make my decision more easy
@@heroliau3866 You're welcome!
Hi Josh one more question , do you have to file tax on ur roth Ira with mutual fund when February on tax day?
quick question why can’t i add full 6k when i’m 21years old?
You can add up to $6,000 per year.
@@JoshBurnsTech great thanks
Entity framework have you used
No, I focus more on the back end. I've worked with companies that use Entity framework, but I just handled the SQL Server side.
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Yes, you will need to understand a decent amount of Windows server admin tasks. You will learn a lot of them as you are going through SQL Server training.
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I recommend going to Upwork and searching for jobs and freelancers with that skill.👍
@@JoshBurnsTech brother....i didnt get anything...can you help me ..how i can able to get work on up work and freelancer..or may you make a video about voice transcribe(voice to text).i have lot of friends who are feeling same problem......
Do Vangaurd ROTH offer Employees match?
No, this video is specific to indiviaul investing. Most employer's offer a 401k match, which the percent varies. Sometimes you will have the option to select roth or non-roth investing options within a 401k. But the key difference in this video is the Roth "IRA", individual retirement account.
what if i make less than the roth ira :|
Make less than the max $6,000 contribution?
You contribute as much as you income and budget allows. It's okay if you can't afford $6,000. If married and your spouse works and made at least $6,000 you can contribute $6,000.
How many Microsoft exams needs to pass to became SQL server dba
No set amount. It comes down to your confidence level working on SQL Server DBA tasks after taking courses.
Your videos are awesome! I love watching it. Let's work together! I want to edit your videos, have you seen our work?
Appreciate that! I actually have a video editor that I’ve been using for 2 years. He’s great! But thanks for reaching out.👍
@@JoshBurnsTech Im glad we connected
can you help guide me? lol
What questions do you have? lol
5:57
hello josh. great video. can you please reply to my email?
Thanks! If you need more direct 1 on 1 help for Upwork, then I highly recommend you take a look at the options on my Patreon page: Patreon.com/JoshBurnsTech