5 Steps To Become A Roth IRA Millionaire (2024)

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5 Steps To Become A Roth IRA Millionaire? ›

Still, the math behind becoming a Roth IRA millionaire still holds. Assuming an annual January contribution to your Roth IRA of $6,500 and an 8% average long-term investment return, you can expect to become an IRA millionaire in just under 34 years.

Still, the math behind becoming a Roth IRA millionaire still holds. Assuming an annual January contribution to your Roth IRA of $6,500 and an 8% average long-term investment return, you can expect to become an IRA millionaire in just under 34 years.

2. Roth conversion. Those who have savings in a tax-deferred account, like a traditional IRA, can convert some or all of that balance to a Roth IRA and pay ordinary income tax on the converted amount.

That's because a Roth IRA is just the account type, not an automatic investment. To build wealth over time, that money you put in needs to be invested. If you're a hands-off investor and you've opted to open your Roth IRA at a robo-advisor, that service will choose a diversified investment portfolio for you.

Despite the nickname, the “Rich Person's Roth” isn't a retirement account at all. Instead, it's a cash value life insurance policy that offers tax-free earnings on investments as well as tax-free withdrawals.

Long-time personal finance columnist Scott Burns writes that by working for four summers starting at age 16, putting the money in a Roth IRA, investing it wisely, and waiting until age 67, it's simple to become a millionaire. 1 That's the 51-year plan.

There were also 391,562 IRA millionaires on Dec. 31, up from 338,725 at the end of September and 280,320 at the end of December 2022.

Income limits for Roth IRAs

For 2024, the modified adjusted gross income (MAGI) phaseout ranges for Roth IRA direct contributions are: $146,000 to $161,000 for individuals filing as single or head of household. $230,000 to $240,000 for married couples filing jointly.

The story, based on confidential IRS data obtained by ProPublica, revealed that tech mogul Peter Thiel has the largest known Roth IRA, worth $5 billion as of 2019.

How much will a Roth IRA grow in 10 years? ›

Let's say you open a Roth IRA and contribute the maximum amount each year. If the base contribution limit remains at $7,000 per year, you'd amass over $100,000 (assuming a 8.77% annual growth rate) after 10 years. After 30 years, you would accumulate over $900,000.

Regular contributions and dollar-cost averaging

The first thing you can do to help maximize your Roth IRA growth is to set up regular contributions. In 2024, you can contribute $7,000 to your Roth IRA. You can set up automatic contributions of $583.33 per month to max out your contributions by the end of the year.

A backdoor Roth IRA is a conversion that allows high earners to open a Roth IRA despite IRS-imposed income limits. Basically, you put money you've already paid taxes on in a traditional IRA, then convert your contributed money into a Roth IRA, and you're done.

The IRS puts annual income limits on a Roth IRA. When you exceed that limit, the IRS generally charges a 6% tax penalty for each year the excess contributions remain in your account. This is triggered at the time you file each year's taxes, giving you until that deadline to remove or recharacterize the misplaced funds.

IRA balances over $25 million are rare but the majority of IRAs have balances of $1 million or less. Annual SEP IRA contribution limits and returns are higher than those associated with traditional and Roth IRAs. Roth IRAs not only let your money grow tax-free, but they also allow tax-free withdrawals.

The Roth IRA contribution limit for 2023 is $6,500 for those under 50, and $7,500 for those 50 and older. And for 2024, the Roth IRA contribution limit is $7,000 for those under 50, and $8,000 for those 50 and older.

The story, based on confidential IRS data obtained by ProPublica, revealed that tech mogul Peter Thiel has the largest known Roth IRA, worth $5 billion as of 2019. In a Senate Finance hearing on retirement on Wednesday, Wyden said such massive accounts underscore the country's inequalities.

Mandatory Distributions for Large Accounts

This proposal applies to employer-sponsored accounts as well as IRAs, and to traditional and Roth sources if the aggregate balance is over $10 million. However, if the balance is over $20 million, then withdrawals must come out of any Roth source first.

The Roth IRA income limits are less than $161,000 for single tax filers and less than $240,000 for those married filing jointly. These numbers are adjusted annually for inflation. Arielle O'Shea leads the investing and taxes team at NerdWallet.

Among the billionaires who have exploited the rules for Roth IRAs is Peter Thiel, one of Paypal' s founders, whose account was worth $5 billion as of 2019 after a value of under $2,000 in 1999, according to the ProPublica report.