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I just want to get on here and talk about all things Roth IRA. My name is Prince Chenou.
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Hey everybody, I hope you all are having a blessed day. I just want to get on here and talk about all things Roth IRA. If this sounds interesting to you, let's get into it. My name is Prince Chenou. I work at a big financial institution and I really just come on here to give any advice, wisdom, or tips that I've learned thus far and really just give back to anybody that's willing to listen.
So, as it pertains to do with Roth IRA, there's really five main things that I want to talk or hit on today. First one is what even is a Roth IRA? The second one is the power of compound interest and starting early. The third one is the contribution limits for a Roth IRA.
The fourth is the flexibility and accessibility with the Roth a Roth IRA account. And then the fifth is what should even be investing with within this account. So as we go into the first topic that I want to talk about, what even is a Roth IRA? So this is a retirement vehicle that you can invest after tax money into it.
And so this is like pretty much whenever you get paid, you can set money aside to invest within this account. And so this is very impactful because your money grows taxfree. You can take that money out in in retirement without having to pay taxes on it or anything. Also big thing about this as well is that you can also take contributions away.
So, let's say if you're a young individual, you put money into it, but then need to take money out. You can take out the money that you've contributed within this account. And we'll talk more about this later on within the flexibility, accessibility portion of the video. So, as we go into the second topic of the power of compound interest and starting early, I just want to start off by this quote that I heard from Abanic and I I heard this once and it it just stuck with me.
And what he's saying is compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn't pays it. And really this just means is that the earlier you start and the more time really talking about the time horizon in here that you have for your money to grow is the bigger the next next the next as it's going to get.
So let me give an example. Let's give a hypothetical example of somebody who's 20 years old and start investing within a Roth IRA account and let's say they retire 50 years old. 30 years of of time horizon that they have and let's say that they had get about a 7% return on their money.
At that point, once they hit 50 years old, they have over 1 million 1.1 million in their account. And vice versa, let's use a different example. Let's say if that same person waited till they were 30 years old and instead of investing $1,000 in the first analogy, let's say they invest $2,000 in this analogy.
And so they and instead of having 30 years to compound, let's say they have 20 years to compound. And in this example, there end up being a little over $900,000 in in that account. So although they invested more when they got older, the person that invested little whenever they younger was able to have more time to compound over time.
So that really just emphasizes the importance of having time on your side and just the small small incremental steps that you take today to help for your future self. So as we transition over to the third thing with the contribute contribution limits currently with the Roth IRA in 2025, you can contribute up to $7,000 and if you're over 50 years old, you can contribute an extra $1,000.
So in total, if you're over 50 years old, you can contribute up to $8,000. So, this is something that you can utilize on a year-to-year basis to try to maximize to make sure that you increase that bucket as much as you can over time. The fourth thing that I want to talk about is the flexibility and accessibility.
Like I touched on earlier in this video, you can you can take the money out of your that you've put into this account, the contri contributions that you've made thus far taxree or penalty free. So, in this instance, I want to give an example. Let's say that you start off by putting $1,000 in your Roth IRA.
And let's say in three years you want to buy, let's say in three years this account has grown to, let's say, $3,000. And so these are qualified expenses that you can pull the money out. So for example, if you're a first-time home buyer, you can take some money out to to pay for that.
Or let's say that you have qualified qualified educational expenses, you can take the money out. So in this instance, you would be able to take that $1,000 that you initially invested tax or penalty free. So this also this is why it's such a great tool to utilize for young investors to be able to put their money in but then also have that flexibility if something were to arise to to take that money out.
The last thing I really want to talk about is what to even invest within a Roth IRA because at the end of the day this is just an account. So, it's something I've realized with a lot of people is you may open up a Roth IRA, but at the same time, and you may even contribute money into the Roth IRA, but you make you have to make sure take that you take that extra step to actually invest in it.
Because I've seen even myself, it took me some I would say probably a year into it that I realize, oh shoot, I didn't even invest this money this whole time just been sitting the cash has been sitting there. And so, it's really important to go in that account and make sure that you're actually investing.
And so just and to talk about a little bit of what you should even invest in the first place, I think it's just try to keep it as broad and diverse as you possibly can. Um, and try to keep it as low fee as possible as well. So usually just a diverse low index fund would do everything that you need it to do, especially because you're looking at it from a time horizon perspective because you just because you had that time for it to grow over time.
So, this would be anything like the S&P 500 or a total market return would do just well in this instance when you're really just looking for time in the market. So, really just to recap all the things that we talked about, we really talked about what what is a Roth IRA, um why compound interest is so important and starting early is so important.
Um the contribution limits of a Roth IRA, flexibility and accessibility within this account, and last but not least, what you should even be investing within a Roth IRA. So, I really do hope this video was helpful. If you have any comments or questions, please put them down in the description below to get a chat going.
And please like, comment, and subscribe. And thank you. Have a blessed day.
This video is for general educational purposes only and is not personalized investment, tax, or legal advice. Every situation is different. Talk with a qualified professional about your circumstances before acting. PLC Wealth Partners is a registered investment adviser. See our disclosures.
