Today’s financial education article is about the benefits of a ROTH IRA and trust me when I say… there’s a lot to cover such as:
What is a ROTH IRA?
How is a Roth different from a traditional IRA?
Should YOU have a ROTH IRA?
Most importantly, I’ll be covering how you can become a millionaire and legally avoid ALL taxes by using a Roth IRA.
Make sure you read to the end because you’ll also see how some people have went beyond millionaire status and hit the billionaire club by taking full advantage of the Roth IRA.
I’ve said it in other articles but as a reminder… this is for informational and entertainment purposes only.
You should always seek counsel from your financial advisor before making any investment decisions.
Like any other investment, it is possible that you could lose everything you invest…
Got it? Good.
What is a Roth IRA
So what is a ROTH IRA and why is it such an exciting investment vehicle?
Let’s go back in history a bit to understand this.. just a little bit… to the year 1989.
The idea was first proposed and presented that year by Senator Bob Packwood and Senator William Roth.
It took some time for the idea to grow some hooks but it became officially established by the taxpayer relief act of 1997, in which Senator Roth was the chief legislative sponsor.
Hence the Name “Roth”
The IRA part is an acronym.
IRA simply stands for Individual Retirement Account.
There are traditional individual retirement accounts and then there is the Roth IRA.
The biggest different is that in a ROTH IRA, instead of getting a tax deduction for contributions and investments, you get NO deduction… zero.. zilch… NADA…..BUT…
And this is a big “but”…
All growth and withdraws inside your ROTH IRA are tax free!!
That’s right, 100% tax free as long as you follow the rules and as long as you only withdraw qualified distributions, (which basically means you don’t withdraw until you’re old enough which is 59 ½.)
For me, that works perfectly because it’s a great way to force me not to touch the money and most investment accounts for retirement have an early withdraw penalty anyway.
Please understand what I’m saying here.
You can literally invest and grow your investment completely, legitimately, and legally… 100% TAX FREE!
That is no joke.
I suggest getting an account started right now because what was meant to help the middle class is now being called into questioned.
Mainly because the Roth IRA does exactly what it was meant to do, which is allow average people to build wealth and keep the American dream alive.
Honestly, it’s probably because of people like Peter Thiel, the founder of PayPal.
He started with $2,000 when he opened his Roth in 1999 and has been able to turn it into approximately 5 Billion dollars!… yes folks, that is Billion with a B.
This is also all tax free money as long as he doesn’t withdraw it until 59.5 years of age.
That is exactly what the Roth IRA was meant for… To give the average person an opportunity to grow their wealth without giving it all to Uncle Sam.
If a billion dollar portfolio is something you’d like to have for yourself, then there is probably no other way for an average investor to get there.
Anyway, as these things usually go, the ROTH is now under scrutiny, mainly because it has done what it was designed to do… create wealth for the average person.
But alas! Politicians don’t like that people have been able to leverage it like that and not be forced to add money to the national monetary fund….
A monetary fund that has a ridiculous burn rate by the way… especially now, as we hand out money faster than the bank hands out lollipops.
But I digress.
One of the questions I posed in the beginning was, should you open a Roth IRA?
Well, the answer is an absolute yes.
I don’t care who you are.
As long as you qualify, you should open one up immediately… um.. like… yesterday.
Opening a ROTH IRA
So what exactly are the qualifications and who can actually open a ROTH?
Let’s go through some of the biggies.
First, keep in mind that the rules change occasionally, so again, check with your financial advisor for more information.
Don’t base your financial decisions on a random online content creator you have never met (in this situation, I’m referring to me).
As long as you have earned income and you aren’t making too much money each year from that earned income, then you should qualify for a ROTH.
How Much Can You Put in a Roth IRA Each Year?
If you do qualify, you can contribute up to $6,000 per year or $7,000 per year if you’re age 50 or over.
That gives us older folks some time to catch up for years missed.
Now we get into the really exciting part.
How can you make money using a ROTH IRA and never pay taxes on it?
Let’s look at Peter Thiel as an example and then I’ll share what my strategy is.
Peter Thiel was the cofounder of PayPal.
Now, you and I probably won’t co-found a company like PayPal, but Thiel did do something we can all do.
In 1999, three years before PayPal went public, Thiel bought 1.7 million shares of the company for .001 (https://www.marketwatch.com/story/you-would-have-to-tread-very-carefully-like-peter-thiel-you-too-can-turn-your-roth-ira-into-a-pot-of-gold-with-some-serious-caveats-11624570001)
The total investment for that many shares at that price is $1,700.
Since you can put $6,000 a year into a Roth IRA, you’d still have some left to invest.
I’m sure Thiel bought more shares after that, but that big play was the catalyst.
As I’m creating this video, PayPal is trading at $270.33.
Even if he hadn’t bought anything else inside of his ROTH IRA, that one purchase alone would be worth over $459 million dollars ($459,000,000).
That’s half a billion dollars folks.
So how can you and I, (the average person) do something similar inside our ROTH IRA’s?
What I’m about to describe is not without risk.
It’s actually very risky and can be described more as gambling than investing.
But I will describe my strategy and you can take it or leave it.
How to Make Billions with a Roth IRA
First, open an online brokerage account like E-trade or TD Ameritrade.
Then start trying to deposit the full amount that is allowable into your ROTH IRA each year, which would be $6,000 or $500 per month.
Regardless of your age, the sooner you get started the better.
If you can’t do $500 a month, do $100 or $50.
Do whatever you can, but make it a priority.
Then let it stack up and start learning about stocks and investing.
I have some traditional investing accounts 401k, etc.
Those are my SAFE AND BORING accounts.
They are for traditional investing.
I want to make a decent return over time to those accounts….
But my ROTH IRA is my high risk account.
The higher the risk, the higher the potential loss…
However, the higher the risk… the higher the potential gain!
Maybe you could describe them as my gambling accounts.
In any case, if I’m going to hit a homerun, I want to do it inside of my tax free Roth IRA account so that when I retire, I never have to pay taxes on it ever!
So inside my Roth, I am always swinging for the fences.
What does that mean exactly and what am I investing in?
Personally, I focus on cheap stock with high growth potential.
I’ve bought a number of penny stocks.
I’ve lost money on a few of them and some of them have folded or been bought out by other companies.
So what I’m about to describe should not be your strategy unless you’re willing to lose it all.
To describe my current strategy, we have to go back… way back to 1983.
Do you know what happened in 1983?
It was the birth of the internet and so it was the birth of a new industry.
With it came fresh excitement and new companies.
These companies often had massive and fast growth as well as high profit margins.
Many of them had massive and fast growth without high profit margins.
The 1990’s ushered in a speculative bubble on Wall Street.
People were buying up shares of online companies and they were growing massively and quickly.
Average people became millionaires overnight and if they sold their shares at the top of the growth they became what was later named “dotcom millionaires”.
Yes, there were so many of them they even have an official name.
If they didn’t sell and rode the speculation all the way back down, they were known as paper millionaires because they were millionaires on paper for a little while.
So how does that relate to the ROTH IRA?
Cashing in On Speculation
(Tax Free Investing Inside Your Roth IRA)
If you’re like me, you know that the world changes a lot, but people basically remain the same.
That’s why history tends to repeat itself.
We have 2 industries right now that are bubbling beneath the surface waiting to go mainstream and explode.
One is the legal cannabis industry and one is cryptocurrency.
If either of those sound like a potential opportunity… then share this article on social media.
After all, the more people who understand this and start investing in these sectors, the quicker and faster the growth will be… it’s called momentum.
Did you share it?
If so, thanks.
If not, you’re killing me man.
Investing in Cryptocurrency and Blockchain Technology
Anyway, let’s start with crypto.
I don’t own much crypto, but what I do own is stock in companies that invest heavily in blockchain technology.
Cryptocurrency is volatile.
It’s also possible it will catch on and be huge…
It’s also possible it will be outlawed and deemed illegal… and never make it into the mainstream.
BUT, the blockchain technology that crypto is traded on is here to stay.
Banks and companies are starting to use it for all sorts of things, so I am investing in blockchain technology.
PayPal changed the way people do business and blockchain is going to do the same thing.
I’m getting positioned now.
Investing in the Cannabis Industry
Secondly is the marijuana market.
I don’t use cannabis in any form and though it’s federally illegal, it is recreationally legal in 18 states.
I don’t promote it’s use and being legal doesn’t make something ethical or morally okay.
Philippians 2:12 tells us to “…work out your own salvation with fear and trembling.”
So where you stand on this is between you and God.
But somebody is going to profit from it because here’s how I interpret the current climate:
1 – It’s only a matter of time before it’s legal on a federal level.
2 – Since it is currently illegal on a federal level, it causes problems for people and businesses who currently want to invest in that sector.
There are a variety of problems and issues that are caused in the market because it’s federally illegal.
Things such as moving product or depositing and moving money.
But the biggest problem is also the biggest opportunity.
Many institutional investment firms cannot invest in that sector because it is against federal law.
When I say intuitional investors I’m talking about huge companies with billions of dollars to invest.
I’m also referring to large mutual fund companies and venture capitalist firms.
The are companies with billions upon billions of dollars to invest.
When cannabis becomes legal on a federal level, my theory is that mayhem will ensue.
That investing mayhem will dwarf what happened with the internet dotcom bubble because unlike the internet back then (which was misunderstood), everyone knows what marijuana does.
They may not agree with it, but it’s been around a long time.
It’s not like the internet in the beginning or even cryptocurrency right now.
Companies will be competing and spending in order to become the Budweiser of the cannabis sector.
They will be spending more money in marketing than is reasonable because there is NO formula for how much is reasonable to become the market leader on a national or global level in that sector.
Trillions of dollars in institutional money will flood the market, driving stock prices up and causing momentum and madness on Wall Street.
As I mentioned, people don’t change, not really.
When the momentum starts, everybody and their brother will be buying and investing in cannabis stocks… which will drive the prices up more.
So I’m playing the long game with my ROTH IRA.
I don’t know if legalization will happen in 1 year or 10 or 20.
But I think it’s coming.
I’m buying up shares of stocks in this sector and waiting for laws to change and for what I believe is an inevitable bubble that will create marijuana millionaires instead of dotcom millionaires.
Heck, it may even create marijuana billionaires.
I have one stock I was investing in that took a hit and it was already dirt cheap, so I stocked up some more.
I own over 20 million shares of that stock.
Imagine it goes to $5 or $10?
Can you imagine if it went to 20 bucks and I basically went from nothing to a billion dollars overnight?
And since it is all done within my Roth IRA, ALL my gains will all be 100% tax free.
Keep in mind, it’s much more likely that it won’t happen that way and I’ll lose money.
In fact, it’s probably more likely I’d lose all the money invested in my Roth than make a billion dollars… but to me it’s worth the risk.
You can’t hit a homerun if you’re always swingin’ for singles.
Base hits will NEVER get you to gains like that and put you in the billionaires club.
I don’t know your situation, but as unlikely as it is that I’ll pick the perfect stock and get enough shares to hit billionaire status… it’s still the best chance I have to be worth hundreds of millions or even billions of dollars.
Probably your best chance too, so why not give it a go?
Opening a Self-Directed Roth IRA
I hope you’ve enjoyed this so far.
But there’s one more thing that you can do with a Roth IRA and that is manage it yourself.
This is one way the rich get richer and how they pay little to no taxes, (but still follow the rules).
I’m always so surprised when people are angry at wealthy people for paying less in taxes simply by using a loophole that is available to everyone (even the person complaining about it).
Anyway, going back to the IRA.
When you manage it and your investments by yourself… inside of your IRA… this is called a self-directed IRA and you can do it with a ROTH IRA as well.
This lets you invest in things other than stocks and mutual funds and never pay taxes on it.
This means you can invest in virtually anything you know about or are willing to learn about, such as traditional real estate, land, gold and silver, cryptocurrency, gas and water rights, etc. (https://money.usnews.com/money/retirement/iras/articles/a-guide-to-self-directed-iras)
There are a few rules to it, but if you follow the rules you’re golden.
Real Estate Investing Inside a Self-Directed ROTH
If you’ve been to my site before, you may already know that I’m a huge fan of land investing because you can make 100%+ ROI on your investments (or more).
There’s no other investment that I know of that can consistently put up numbers like that.
I was able to start with $1,000 and flip it into $100,000!
If you want to see how I did that (step-by-step), go to my How to Flip Money article and check out #6 on the list.
Unfortunately, I didn’t know I could do that inside of a self-directed IRA when I started, so I had to pay capital gains taxes on all of it.
In the future though, I plan to roll my money into a self directed Roth IRA so I don’t have to pay taxes on any of the profit from my flips.
If you’d like to learn more about how to flip land, check out my land flipping vs. house flipping article.
For more on making millions inside of a self-directed IRA’s, then check out my Self-Directed Roth IRA article.
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God Bless,
Jason and Daniele
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