Reach financial independence with a Roth IRA in a few easy steps!
Before opening a Roth IRA, you have to consider a few things:
1. Check if you are eligible to contribute directly to a Roth IRA
There is an income limit of a Modified Adjusted Gross Income of $161,000 or less for the 2024 tax year (single filer)
This means that if you are over this limit, you must take extra steps by contributing via the Backdoor Roth method
2. Pick which brokerage company you want to invest with
I personally decided to invest in the same company where my employer retirement accounts are held (Vanguard)
Other options include: Fidelity, Schwab, SoFi, Betterment, Wealthfront
3. Now OPEN your account by following the steps provided by your chosen brokerage company. I have provided a guide with screenshots from Vanguard:
a. Find the "Open an account" button
b. Pick "Open a new account with money from my bank"
c. Choose "On my Own" as you will manage your own investments in this account
d. Select your account type by answering these questions:
-What is your investment goal? Retirement
-Who is the account for?
Myself
-Select a relevant account:
Roth brokerage IRA
e. Enter your personal information on the next screen
-Including your name, email, birthday, citizenship, social security number, address, phone number
-If you are a new customer, you will also be required to create a username and password
f. Fund your account
-Here you will likely fund from a checking or savings account
-Continue to follow instructions with connecting your bank account
-Fund your account
g. Your money will be held in a settlement fund
IMPORTANT TO NOTE: Your money is not being invested in the settlement fund
f. Continue to follow the screens and answer information regarding your employer, reason for investing, and net worth
g. Review your final application and submit!
h. The FINAL STEP after opening your Roth IRA is to actually invest the money that is in your settlement fund
4. INVEST the money in your Roth IRA
a. Click the "Transact" button and choose either:
-Buy Vanguard funds (ie. VTSAX) or
-Trade Vanguard ETFs (and Non-Vanguard ETFs) [ie. VTI, QQQ, ect.]
b. Follow the steps to BUY your index fund or ETF with the money in your settlement fund
5. Set up automatic investments and fund your Roth IRA monthly to reach financial independence the lazy way!
How much can you potentially gain from investing in a Roth IRA?
Example:
$500 monthly contributions
Over 30 years
8% investment returns (+/-2%)
$685,000 at 8%
With $477k at 6% returns and almost $1 million at 10% returns!
Remember that this money will all be TAX-FREE when you withdraw since you've invested in a Roth account.
Disclaimer: This is financial education only, not financial advice. Please be advised that the potential for market growth is not guaranteed, and past performance is not indicative of future results. Investments in financial markets carry inherent risks, and individuals should carefully consider their financial objectives and risk tolerance before making investment decisions
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