5 Roth IRA Benefits You Didn’t Know About

Episode Transcript

(00:00) drop the money in there already don’t feel like it’s tied up until you’re older I know a lot of people in their 20s and 30s don’t put money in a retirement account they’re like well what if I need money for a home what if I need money to start a business what if I need money to pay for college guys don’t worry about it the exact money you put in you can take out for any freaking reason you want the government doesn’t want you to die with money in your retirement account they would love to tax you before you die so if you have
(00:24) money in a 401k a traditional 401K a traditional IRA and you start to get into your 7s the IRS is going to go you got to start taking some required minimum distributions and if you don’t do it there’s some penalties it’s not fun well do I have to do that with the Roth man we’re excited to be with you today because we are talking about one of our favorite things the Roth IRA and some of you know a Roth IRA and we know the benefit taxfree growth but there’s a lot more to it than just taxfree growth oh so many hidden Little Treasures with
(00:54) the Roth it just keep it’s a gift that just keeps given it really does you know even Uncle Eddie would Ro yeah I’m already looking at your list and I almost want to add number five is the inherited Roth that’s why I got the spousal but you could do inherited number five good Lord all right we’re already we’re already making audibles yeah we’re calling audibles all right so let’s get to it this is exciting and we really do believe the Roth IRA is the Cadillac the the the what are they the flagship of proper retirement planning
(01:26) because it’s just something everybody should fund every year and there’s so many incredible benefits I’m going to hit the basic and then you can start with number one basic that all of you should already know is a Roth grows taxfree it’s not tax deferred you’re going to put money in after tax money so you’re going to pay taxes and then any money you have laying around per se you’re going to put into your Roth you don’t get a write off but then you can build it taxfree pull it out taxfree after you’ve held it five years or you
(01:53) turn 59 and a half whichever is later so 59 half is when this tax-free ATM really turns on if you’re uh later in life and you haven’t started a Roth get on it and they’re great at any age any income level you just need earned income you’re going to build that WTH okay that’s the basics most people kind of know um yeah but now let’s give you some unique benefits what’s number one yeah the first unique benefit is the back door Roth IRA cuz a lot of people think ah I can’t do a Roth IR I make too much money my account told me I make 200 Grand year
(02:30) and I don’t qualify for it anymore if I’m single you know or maybe I’m making 300 or 250k it kind of starts phasing out there if you’re married and so you’ve been told that that’s not true you can still do a Roth IRA it takes the backdoor Roth IRA which is a way you put money into a traditional irra that’s a non-deductible contribution you don’t take a deduction on it and then you do a Roth conversion and you move that seven Grand a year 8,000 if you’re 50 year older but you can put in a certain amount per year you move that over into
(02:58) the Roth IRA with a conversion now typically when you do a Roth conversion it’s taxable right if I convert $100,000 from traditional to Roth I have to pay tax and I take that 100,000 in income but in the back door Roth IRA it was non-deductible let’s say it was Seven Grand and I do a conversion that seven Grand goes into a Roth IR no tax because I never took a deduction and it is shocking how many professionals that are licensed financial advisers in the industry don’t even know this and so don’t be too mad if you’re like well
(03:28) I’ve never heard about this what the heck why isn’t my told me it’s just it it’s the craziest thing I don’t know why it’s not uh talked about more in the financial uh industry but this is a big topic we’ve got other podcasts on the back door so you want to go we’re going to give you these five unique benefits each one of these is its own podcast you can go back into the history and we’ve got articles on this this is a strategy in Matt’s book the direct self-directed Ira handbook so there’s more to learn here but let’s just tell you whatever
(03:58) you’ve heard it’s it’s a myth you can have a 401k at work you can have a Roth IRA you can make a lot of money have a Roth IRA you can be old you can be young you can have a Roth IRA roths for everybody Ro yeah so it’s all good so that’s the first unique benefit that many people don’t realize is that you’re you can be a part of the party so if you wanted to be in that frat house and you wanted to go to that party and you made too much money you couldn’t walk in the front door you can get in the side door you can get into gamma gam Roth party
(04:29) and yeah it’s it’s there forar rooth for everyone all right you’re in you’re in the party um and you know like Mark said we do have other videos on this if you have traditional IRAs you have to convert those first there’s some there’s some other rules on that some little some good takeaways all right uh I might number two all right let me hit number two this is something I love about the Roth IRA because this is very unique to a Roth IRA you can’t do it in a Roth 41k you can’t do it in a traditional you can’t do it in a traditional 41k it’s
(04:55) the one thing you can do it only counts in a Roth IRA when I put my Seven Grand a year into a Roth IRA let’s say I did that for three years $21,000 of contributions in the Roth IRA and let’s say the account’s now worth 30 grand because I had some investment growth you know $9,000 of investment growth now I can take that 21,000 out whenever I want the contributions you put into a Roth IRA you can take out whenever you want no penalty Matt no penalty no tax no tax okay I don’t have to wait till I’m 59 A2 I don’t have to wait 5 years I can take
(05:27) it out whenever I want it’s a unique thing to ra and the reason I love it is because I want people to feel like drop the money in there already don’t feel like it’s tied up until you’re older I know a lot of people in their 20s and 30s don’t put money in a retirement account they’re like well what if I need money for a home what if I need money to start a business what if I need money to pay for college guys don’t worry about it the exact money you put in you can take out for any freaking reason you want I love it not that we would
(05:51) recommend that we we want to let that snowball get you know go down the hill and every time it turns over you get more and more snow on it but if you need need to now this is why the Roth IRA is our Preferred Choice again even compared to life insurance and I know that some of you out here listening to this show have been hit up with whole life Flex you universal life vul you know Infinity this whatever that they’re coming up with every name they can in the book to sell you life insurance not that life insurance is bad not that it doesn’t
(06:20) work but it’s not a replacement for a it’s not a replacement you start with the Roth because you have so much more control over it you can invest in anything you want you you wouldn’t be listening to this podcast if you didn’t know that you can self-direct the Roth you can put that money in take it out let the snowball keep going down the hill all these unique benefits where life insurance is more Lock and Load stick on the plan you’re on a train and it’s on a train track that’s it’s hard to get off and so uh again not that it’s
(06:50) bad now we again have podcasts on the Roth strategy and how we even use this with uh College savings I like this for kids they can pull it out for college no tax no penalty so very unique benefit I love that as number two yeah the only caveat I’ll say there is if you’re doing the backdoor Roth IRA and you want to pull those contributions out that’s 7,000 a year there is a fiveyear rule but you can even out do that before you’re 59 and a half so let’s say in 2019 I dropped in 6,000 bucks that year and now it’s 5 years later I can pull
(07:25) that out even though I’m not 59 a half so there’s a 5year Roth conversion for each conversion that applies to a back door Roth IR but a regular Roth IRA where you’re making your contributions you pull those contributions out whenever the heck you want all right now number three and some of you may not realize how cool this is but it’s called the rmd required minimum distribution now if you’ve never heard of this the concept is the government doesn’t want you to die with money in your retirement account they would love to tax you
(07:54) before you die so if you have money in a 401k a traditional 401K a traditional and you start to get into your 70s the IRS is going to go you got to start taking some required minimum distributions and start draining that account we want to tax it you’ve been you set it aside for retirement now damn it use it and so there’s this required minimum distribution Rule and if you don’t do it there’s some penalties it’s not fun and it’s a pain in the butt you got to go do calculations every year it’s based on all of your retirement
(08:25) accounts and la la la la la well do I have to do that with the Roat you get a skip you get like this skip card in know you know little pass you just pass that to the iris and you say skip I got a Roth all right there’s no rmd is that 73 is that magic age right now you hit that you got a Roth IRA no rmd and here’s another thing that’s funny I was talking to a CPA the other day he converted all of his traditional accounts to Roth and one of the reasons he did it is he wanted to be under the income limits where he still got this his Social
(08:55) Security wasn’t taxable he’s really trying to like really structure his income he’s like cuz I got the Roth there’s no rmd but if I had the traditional I had to take out a certain amount and that would make it become tax taxable put them in a different bracket yeah put me puts me in a tax go gosh this is why that Roth conversion when you can do it is so powerful we want you to turn the corner into retirement with all your money Roth and yes it’s taxed when you convert but we want to do it in chunks we call it chunking we’ve got
(09:24) podcasts on that and the Roth conversion is such a fun strategy because Matt said it before and he’ll say it again short-term pain for long-term gain boom boom let’s get on that track so uh super exciting no rmds all right number four okay number four the spousal rollover now I know this isn’t a perk you’re looking forward to but maybe your spouse is when you die cuz in this example you die yeah now in this we are there is a catch you may not be married and we want to talk about the inherited Roth cuz it’s the sister to this and a lot of
(09:58) people don’t know about this you benefit so even if you’re not married pay attention yeah so first married all right first married you can do a spousal rollover so when you pass away your surviving spouse can inherit your Roth IRA and it becomes a Roth IRA for them it’s in their name if they already have a Roth IRA they can just roll the money of the Assets in their Roth IRA in in your Roth IRA into their Roth IRA the nice thing about that is if you have a younger spouse even it doesn’t really matter the age frankly is they just get
(10:28) to take it into their own account it’s not an inherited Roth which we’re going to talk about here in a second that has a 10year clock on it they it can go for on forever they want they don’t need to do rmd just like we talked about earlier and so that’s a really cool benefit um to the Roth are for spouse is you can do the spouse to roll over no rmd now on this note please consider updating your estate plan for those of you out there 50% of Americans don’t even have a will let alone a trust and we can set up
(10:57) estate plans in almost all 50 states we’ve got a team of 12 lawyers doing it constantly every day very affordable well when you do your estate plan you want to think of okay who are the beneficiaries of these different accounts maybe you have an old 401k laying around an old Roth an old sep an old Health Savings Account you’ve got llc’s you’ve got your home you’ve got life insurance you need to be thinking about all these different assets and which ones you can carve out and go okay I’ve got kids from my first marriage or
(11:26) second marriage and this and we want to carve things up and yada yada well the Roth is one that’s got such a unique benefit that’s one you may want to carve out and say okay that’s going to go to the spouse or it’s going to go to a certain kid or this or that because there’s these different strategies so this is a hopefully a great reminder for you to also get your estate plan done it’s always an important strategy to consider who are the beneficiaries of all these accounts because you may think if this is going to happen automatic
(11:52) uhuh if you don’t have you’ve got the wrong beneficiary on these accounts what we’re talking about isn’t going to happen great point now if I just inherit a Roth oh baby those are pretty cool too so if you got a grandma or Grandpa right now it’s good to call go hey I’m going to put money in your Roth IRA if but just make you me your beneficiary and I’ll put that in there for you because if I inherit a Roth what’s the benefit the nice thing about an inherited Roth is you get to keep it 10 years now this is not for spouses so this would be a
(12:22) non-spouse beneficiary could be kids grandkids friend brother sister whatever but when you inherit that account from the deceased person they had a Roth you can do an inherited Roth IRA which means you get to keep running that thing okay now I’ve got a 10year window of when I get to keep investing this thing a 10y year taxfree ATM I do I have to wait till I’m 59 and a half no what you can pull it out whenever you want so it’s like year two you want to take a bunch of money go for it you know you want to let it all ride for the whole 10e cycle
(12:53) Let It Ride oh man okay let’s repeat that I in call up Grandpa or Grandma right now and go mom and dad and go hey I will help fund your Roth IRA if you’ll make me the beneficiary which is fine just make sure they have earned income you gift them some money and help them pump up that Roth IRA they die in the next is this really morbid what I’m suggesting in the next five or 10 years or who knows what they pass away you inherit that WTH at any age you could be 20 years 30 years 40 years old I can start taking distributions out of that
(13:24) Roth taxfree penalty-free for the next 10 years invest it let it ride whatever the coolest thing so it’s like the best and I think you know it’s funny we talked about like inheriting assets what’s the number one asset I’d want to inherit you know it would be a Roth IRA if you got 100K in a bank 100K in a traditional IRA and 100K of Roth IRA I am going to be dying myself to get the 100,000 Roth IRA is what I inherit because here’s why that $100,000 Roth IRA I can go invest it and I can go turn it into 200 Grand in the next 10 years
(14:01) no taxes that $100,000 traditional IRA by the way anything I pull out of that I mean if I’m in a 30% tax bracket that’s really only worth 70 grand to me because I got to pay the taxes get out the Roth I get every penny out plus all the investment gains the individual bank account same thing it’s just regular money there’s no tax benefits to it if I keep investing it and try to grow that and so that’s the power of the Roth IRA for any of your airs and so one of the things I actually had a client do re this is a client worth tens of millions
(14:31) of dollars okay had some pretty big accounts and he was like I’m converting all my traditional accounts to Roth and I’m going to pay all the tax now for my kids and family because I want to lower my Estate Value because he’s in a weird estate tax situation now was getting money out of the state but was a more valuable asset a Roth account than a traditional account for his kids to inherit so little Pro tip here maybe your estate pl’s done but are your parents estate plans finished or your grandpa or Grandma’s this would be a
(15:00) great time for you to say hey let me pay that bill for the lawyer to get your estate plan done oh and my brother and sister they would love those accounts they love that can I just get the Roth and you can just totally gamify that process was this recorded did I just say all that out I mean I think you’re being helpful I’m being helpful yeah because Mom and Dad need to get their estate plan done you’re the one child that stepped up to the plate and paid for it and got it done you can take the WTH off the table
(15:29) I I think that’s fair someone needs to get it yeah someone got to get it okay number five rounding the corner Matt what could it be that people just don’t know about guys you can self-direct your Roth IRA the number one account we have here at directed Ira is a Roth IRA and if you’re like what the hell is self-directing about your IRA can invest in real estate it can buy a rental property down the street it could buy Bitcoin it could buy other crypto it can invest in a private fund a startup a small business down the street your IRA
(15:58) doesn’t have to buy publicly traded stocks mutual funds or ETFs that you don’t even care about or aren’t interested or already overallocated in okay it could invest in these quote unquote alternative assets and so that’s what we do every day at our company we have two billion in assets 20,000 accounts and these are people that are taking trol of their retirement account to invest in what they know that’s what our podcast is all about the directed ra podcast so if you’re like new to the show here and you’re catching some of
(16:22) these perks on Roth IRAs one of them is just investing it better investing in stuff you know that’s going to get a greater return turn and build your account better and that’s what my book’s about to the self Hamburg now I know some of you like where am I going to find these assets where do I learn about what my Roth can invest in wouldn’t it be nice if you guys held maybe a two-day Conference of some sort about alternative Investments and helped us know about it we ought to do that oh we are yeah October 24th and 25th here in
(16:51) Scott still Arizona alt asset summit.com you can learn about investing in rental real estate multif family commercial distressed assets um crypto private Equity Venture Capital we have speakers in all these areas is what they do they have expertise in this they’re going to talk about how you invest in these different types of asset classes so you’re not investing in just some boring mutual fund you can’t even say the name of it and only if we could broadcast it virtually so the people that couldn’t make it to Phoenix not
(17:18) that you wouldn’t want to come to Phoenix in October the the most this is the best time and of October is an amazing time man we ought to golf on Saturday you know yeah yeah I wish we could broadcast it oh we are so if you want to buy a virtual ticket get over to altassets summit.com is that right altassets summit.
(17:41) com get a ticket get a bowl of popcorn get the whole family around this computer screen and say let’s invest in our Roth together let’s find something cool to do together and oh by the way did you guys know about four other unique benefits of a Roth you could be a superstar and share the last four Strate strategies as well how fun is that yeah that’s pretty freaking awesome so well we hope we open your eyes to some things you didn’t think about of a Roth a lot of people know the taxfree growth I mean that’s the really cool thing but there’s so many more
(18:07) things to it and benefits that Roth iries have that other accounts don’t so uh please make sure you’re subscribed to the podcast subscribe to the YouTube channel we want to give you tips on how to save wealth how to save taxes and I’ll give a Shameless plug to this little goodie right here the book titled the self-directed iy handbook second edition written by the infamous Matt Sor and when is the third edition coming out get to work I no we’ll we’ll get to it we’ll get the tax laws haven’t changed once the laws change if we get some you
(18:36) know we could have a new president oh we’re gonna have a new president we could we’re gonna have a new president one way or the other yeah because thank goodness for that but anyways we’re gonna have one one way or the other and there might be some tax changes and if there are there going to need a new book yep so uh get a copy of that some of you may like video learning with video both of our YouTube channels have so much content you might like this this podcast platform that’s your Ben your primary way you love to learn get back and check
(19:02) out our 100 plus episodes of other uh podcasts on all these different topics and some of you might like to read You’ got the Incredible Book the self-directed IR handbook some of you like to look come to a a live conference we’ve got that people however you want to learn this content it is imperative that you learn it we’ve got the medium the platform for you to learn it we’re not going anywhere we love you we love the American dream thanks for watching and we’ll see you next week go never Bab [Music]