What's up guys this is Kevin McKee with thousander.com and today I'm going to teach you what a Roth IRA is. We're going to go quick so keep up. Roth IRA is a retirement account. That is really awesome. Faux show. Okay not really. A Roth IRA, Roth is the name of a politician and an IRA is an individual retirement account. Okay now that we all get that, let's move on. Let's talk about investing. Okay what do you have to do to invest? Well there's really three steps. The first is you have to make some money. Okay pretty simple. The second you have to invest it like in this box. Okay now what is in this box? That's a great question. It can be anything. You can invest in stocks, bonds, mutual funds, money market accounts, treasury bills, CDs and more. You can even do a savings account. It doesn't really matter. You can invest wherever you want, wherever your money is going to earn some interest. Okay so when you put money in there you put a little bit in and it has little money babies. This is interest and then you put more in and you have bigger money babies and this is going to keep growing and growing until you're rich. Okay last step, take the money out of wherever you invested it and spend it. Maybe you like buying boats. Maybe you like donuts with sprinkles. I don't care which buy it's your money. Well there's one person who does care and that's Uncle Sam, the government. He wants your money. He wants as much of your money as you're willing to let him take. So what's he going to do? He's going to tax you when you make the money. That's called income tax. He's going to tax you when the money grows. That's capital gains tax and this doesn't just happen once every year as you get gains on your interest. He's going to take more. Let me show you how that works. We'll put him there. Let's say you made $6,600. Great. Well he wants his income tax. So now that's down to 5,000 at 25% if you are in the 25% tax bracket which the average American is. Now you get interest on this $5,000. Let's say the interest is 10%. You can get that in the stock market. Okay 10% of 5,500. Well he wants capital gains tax now. So you're 375. He takes that. Now he's going to move back here. You're at 6,600 again. He takes his income tax 5,000. He takes that and then he's going to move back to here and your interest is 1038. He takes his share and 778. You can keep getting interest in here. He's going to keep taking his piece. He takes lots of money and it's not good for you. So how can we stop that? Well there's one really good way to stop that and we call it an IRA. And then IRA is like a force field against Uncle Sam and he can't get your money. Pretend like your IRA is a Starship Enterprise and you're a Jean-Luc Picard and the tax man is a Borg Spaceship and Jean-Luc Picard says raise your shields and the Borg Spaceship is like or a cube if you're a fan. And it's trying to penetrate this force field but it can't because the IRA is too powerful for the Borg Spaceship for Uncle Sam. Uncle Sam cannot penetrate it. Jean-Luc Picard is an IRA. Okay so IRA. There's two ways to do an IRA. He's still going to get you but he can't get you in here. If he gets you at the beginning he taxes you when you make it. That's a Roth IRA. It be taxes you at the end when you take it out. That is a traditional IRA. We're going to talk first about a traditional IRA because this is the old one. Traditional. Curse it. That's old. Okay you make $5,000. There's no tax man here. Goes right in. Interest? 500. No tax man here. Goes in. $5,000 again. Boom. $1,050 in interest. Boom. Okay now this keeps growing and growing. You get the point. You understand you're smart. Now it becomes let's say by the time you retire a million dollars. Retirement. That's the key. You can't take money out of that account until you are 59 and one half years old. That's a long time. There's also some qualified distributions and we'll put that in the corner down here like if you want to buy your first house or if you go back to school. I don't really know how to draw a school. Maybe put a flag there and if you get really sick or you die then they're not going to tax you but otherwise you're going to have to pay big taxes. You're a regular tax which for most people 25% and then a 10% penalty. So 35% penalty to take money out of there unless you wait till here. So you leave that money in and you let it sit but you can't touch it and then finally when you come out he's been waiting here and he says you know what I've been waiting for 35 years to get to that money since you were really young and I'm going to take a chunk and now that million is $6,650,000. That kind of stinks. You still made a lot more money than you would have if the IRA wasn't there but he takes a lot at the end and you really don't have to take all million out at once but that's just to explain. So let's move him from here to the beginning and that's not a traditionally more that's a Roth IRA and block letters and colors because it's new and fancy and exciting. So let's walk through this again. $6,600. He's going to take his piece at the beginning. You're down to 5,000. Put it in there and let's put a big red line in between. You can hardly see it. Let's make it a black line. Big black line. This is what you put in. This is your interest. So your interest now is $500. He can't get it. So no taxes. Next another $6,600 right here. He's going to take his piece and 5,000 again and your interest now is 1,050. Great. Now here's the great thing about a Roth IRA. This money has already been taxed. So guess what? If I want to take that money, here's me coming into my Roth IRA. I look like Brad Pitt. I can take this and spend it on whatever I want. I can buy a car with it. A really fancy car that I have no business buying. You know why? Because he doesn't get to tell me what I do with my contributions. It's on this side of the line. Okay. Your interest. This is just like a traditional IRA. You have to wait till $59.5 or you have to wait for one of these, the house or the school or whatever, the qualified distributions to get to this money. So this is like a big Christmas present and it's packaged up and it's not a Christmas present. It's a retirement present and you can't open it till you retire. Okay. So ideally you do want to leave your money in here because then it keeps growing and growing and then you get lots of money when you retire. Okay. Here's the next best part. So let's say it keeps growing and growing and by the time you get done you have 300,000 on this side of the line and 700,000 on the interest side of the line. Okay. Now that's definitely possible. I have a spreadsheet on my website called the RC. You can see how this is possible to have actually way more in your interest than you do in your contributions. So this money has never been taxed. Remember he hasn't come in here and tax it yet. Guess what? All of it comes out without being taxed. That's a million dollars when you're done. It's awesome. This is the only way that I know of that you can get tons and tons of money, hundreds of thousands or even millions without this guy touching a penny of it. That's why this is so fantastic. Okay. This is a mess. Let's clean it up and let's review. Get this out of here. All right. Benefits of IRAs. Okay. They are taxed only once. Awesome. Qualified distributions if you need them like your house or your school or if something bad happens medically or unfortunately you die. So then benefits of a Roth IRA is those plus you can withdraw your contributions at any time without being taxed. No penalties. Nothing. Don't even think about that 35% and you are never taxed on your interest earned which could be hundreds of thousands or millions of dollars that go untaxed by the government. That is awesome. Okay. So that's a Roth IRA. That was an awesome video. Comment. Rate. Subscribe. And tell your friends thousandary.com Twitter. Kevin is money. Follow me. Awesome. See you guys later. Thousandary.com.