How To Open A Roth IRA Retirement Account (Step By Step)

how’s it going today guys welcome back

to the channel i hope you’re having a

great day so far so in this video today

we’re going to be talking about how to

open up a roth ira retirement account as

well as a handful of reasons why many

savvy investors are taking advantage of

this favorable tax account so when it

comes down to it guys there’s very few

ways in this country to legally avoid

paying taxes and honestly one of the

best options that’s still available to

most individuals is that roth ira

account it is a completely legal method

for dodging taxes on your investments so

long as you’re okay with these

stipulations that go along with this

type of account that we’re going to

cover today now especially this time of

year a lot of people are getting ready

for the end of the year and tax season

and that is when a lot of people start

thinking about their roth ira accounts

because the contribution limit for this

account resets every 12 months so it’s

basically a special type of investment

account where you’re able to contribute

money in a tax sheltered manner and that

limit resets every single year so a lot

of people take advantage of this and max

out their roth contributions every

single year somewhere around tax season

now before we get into the details about

the roth ira i do have a few quick

disclaimers to make first of all i am

not a financial advisor and this is not

any sort of financial advice also guys

um there’s no official sponsor or

anything for this video i am going to

mention m1 finance which is one of my

affiliates and that is the brokerage

account that i personally use myself i

have most of my stock market investments

with m1 finance so if you want to

support me for putting this video

together feel free to use the affiliate

link for m1 finance down below so that

being said guys let’s cover the basics

now of a roth ira well first of all a

roth ira is just like any other

investment account out there it’s going

to live within your same brokerage but

simply be a separate account and you’re

going to have the same functionality

that you do with that brokerage it’s

just simply in a different account for

tax classifications so the concept of a

roth ira is really pretty simple guys

it’s basically the difference of

choosing this account type versus that

account type when opening up a brokerage

account after that everything else is

going to be completely the same as

investing in a taxable brokerage account

other than the annual contribution

limits now there’s a few other important


associated with a roth ira that we’re

going to cover now so first of all

number one is that six thousand dollar

annual contribution limit so basically

because this is such a lucrative

opportunity the government puts a cap on

the total amount that you can contribute

otherwise a lot of people would just put

hundreds and hundreds of thousands of

dollars per year into this tax sheltered

account second of all there are income

limits associated with a roth ira now

there are ways to get around that with

something called a back door roth but

personally it’s something i have never

done myself so the gist of this here

guys is that your income must be under

140 000

to be fully eligible for a full

contribution to that roth ira but as

your income goes higher and higher

there’s a smaller and smaller amount you

can contribute until you reach a point

where you’re just not allowed to

directly contribute to a roth ira

meaning you would have to utilize a

backdoor roth also for certain age

groups there’s an additional one

thousand dollars that can be contributed

to your roth account making that minimum

seven thousand instead of six thousand

and every couple of years um the irs

typically raises that limit to keep pace

with inflation and other factors that

are deteriorating the value of your

money now there’s a big misconception

out there that once you put your money

into a roth ira you cannot touch it

until you retire and that is honestly

just not correct here guys what you

can’t touch is your earnings on the

money that you put in but you can touch

those contributions at any point in time

so a major difference between the roth

versus a 401k is you’re contributing

post tax dollars you’ve already paid

your taxes on that money and now you’re

putting it in there to let those

earnings grow tax-free assuming you

follow you know

the timeline for taking distributions

which is well into your 50s however what

a lot of people don’t realize is you can

touch those contributions and take those

out tax-free penalty-free so let’s say

for example you put 6000 in a roth ira

account and four years later the value

was ten thousand dollars you could take

six thousand out your contribution

penalty free tax free but if you touch

that four thousand of earnings now

you’re going to pay taxes as well as

penalties so you’re not locking your

money up away forever but you know

you’re only allowed to take out your

contributions not any of the earning now

when it comes to how to open up a roth

ira account like i said earlier it’s

pretty much the same exact process of

opening up a brokerage account that is a

taxable account you’re going to need to

have information on hand such as your

name your address social security number

etc and that is going to be what is

required to open this account now some

brokerages do have a minimum for this

account type and others simply don’t

offer it at all the reason why i like m1

finance for the roth ira

is because they are 100 commission free

they offer fractional shares they also

have pre-built portfolios that are

completely free to invest in including

target date retirement funds so if you

wanted to have a set it and forget it

approach to your roth ira you could

simply automatically have your

contributions going in on a monthly

basis getting you to that 6 000 figure

say 500 per month and be automatically

investing that into a target date

retirement fund that rebalances or

changes those investments automatically

so the other reason that i like them as

well is because they offer you know a

portfolio level dividend reinvestment if

you want to reinvest those dividends to

earn compound interest and overall

they’re just a very solid long-term

portfolio based investing platform if

you guys want to sign up as i said

there’s an affiliate link down below but

i also have a completely free 30-minute

video training that walks you through

step-by-step how to get started with m1

finance that is also down in the

description below so assuming you wanted

to open up a roth ira with m1 finance

these would be the steps number one

you’re going to download m1 finance and

if you want to support me you can use

that link in the description number two

after that you’re going to create an

account with m1 finance where you’re

going to be providing your name address

social etc for tax purposes number three

after that you’re going to choose a roth

ira as the account type and the minimum

to open up an account a retirement

account with m1 is 500

after that you’re either going to create

your own investment pie by choosing

stocks or etfs that you want to invest

in and allocating a percentage to each

one of those or you can rely on an

expert built portfolio and simply choose

one to invest in and then after that you

can simply make a full contribution or a

partial contribution or you might just

want to start out with you know 50 bucks

a month even if you can’t afford to max

out your full contribution but anyways

guys it’s a really simple process and

it’s a pretty simple concept to

understand here it’s basically a very

powerful tool to build wealth tax free

we don’t know how much longer this will

be available hopefully forever but these

things tend to change all of the time so

i would recommend if you haven’t already

and if you’re eligible definitely

consider taking advantage of a roth ira

retirement account but anyways guys

that’s going to wrap up this video i

hope you enjoyed it if you did make sure

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as always i hope to see you next time