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Collin Harness


Why I invest in a ROTH IRA account

A ROTH IRA account is one the best ways to build long term wealth tax free.

    1. A ROTH IRA is a retirement account

    A ROTH IRA is simply a place for you to park investments. Just like a checking account or stock account. A ROTH IRA is not an investment itself. You open a ROTH IRA and then make investments within the ROTH.

    Choose your ROTH IRA provider carefully. Some of the charge fees. Some of them do not have good investment options.

    2. Pay tax today and the investments inside the ROTH grow tax free

    The idea of a ROTH IRA is that you put money into the account today and you pay tax on that money in this fiscal year. Then any investment gains you receive inside this account are allowed to grow tax free. When you withdraw the money 30 years from now you do not have to pay tax on that money, because you already paid tax on the principal amount.

    This is the government encouraging you to save for retirement so they give you a tax break.

    3. You can withdraw any principal amount you put into the account at anytime

    You may use this account as a place to park money. An emergency fund. Any money you put into the account you are allowed to withdraw that money at anytime.

    I would discourage this.

    This is designed to be a long term investing account. Don't invest any money that you need in the short term.

    4. You cannot withdraw any investments gains tax free until you reach retirement age

    It is not perfect.

    I told you that you can withdraw anything you put into this account.

    But not the investment gains.

    If you receive dividends or capital gains you are now allowed to withdraw these until you reach 59 1/2 years old. Otherwise it is like withdrawing money from a 401k, you will be hit with a penalty.

    You really need to think of this as a retirement investment account. Anything you add to this account you should not touch until you reach a certain age.

    5. Choose your ROTH IRA provider carefully

    They are not all created equal.

    Is it easy to use?

    Will the provider be around 30 years from now?

    What investment options do they provide?

    What fees does that provider charge?

    Answer all of these questions before you choose a provider.

    6. It is possible to invest real estate and/or into private equity through your ROTH IRA


    Some people have become insanely wealthy: Mitt Romney, Peter Thiel. By making investments inside their ROTH IRA.

    Specifically, real estate and private equity, you will need to go beyond a ROTH IRA provider. You should most likely connect with an attorney or someone who specializes in these types of investments/vehicles.

    7. There is a limit to how much you can deposit

    The US government is giving you a tax break with this account. But they still want their tax funds.

    You are only allowed $6,000 per year or $7,000 after a certain age you are allowed to put into this account.

    8. There is an income limit for a person to contribute, but there is a loophole that allows wealth individuals to contribute money to

    If you make over a certain amount of money you have to put money first into a traditional IRA and then move the money over to a ROTH IRA.

    9. This should be on of the tools, but not the only one that you use to build long term wealth

    This account is one piece of your retirement puzzle.

    - Cash Savings

    - HSA, medicare

    - 401k

    - Stock account

    - Social Security

    - US Bonds, Series I bonds

    - Real estate

    - Small business

    These are all investments you should consider adding to your portfolio along you path toward retirement.

    10. Do I really need a ROTH IRA? Is there an alternative option?


    You could simply invest in a stock account. Put everything into growing your stock portfolio and then start withdrawing the money when you are ready to retire. It is easier to manage, but you do not get any tax breaks.

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