Starting at age 16 – How to become a millionaire with only $16 a day.

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We all know that Social Security and pensions are not guaranteed to us when we retire, this means it is up to you to build the wealth you desire. 

No one wants to live out their final year’s poor, so in this video I will show you how to retire a millionaire with the money you need to live a comfortable life.

So just how much money are we talking about?  How about starting with over $1.6 million dollars in your retirement funds with an initial investment of less than $20 per day.  Plus, if you stick through to the very end of the video, I will give you a bonus tip that can more than TRIPLE this.

But first, now that I have your attention, please hit the like & subscribe buttons. Doing so helps push the YouTube algorithm to show this video to more and more people. Also, we need to get the legal mumbo-jumbo out of the way: I am not a certified financial advisor, nor an accountant, nor a tax lawyer, and everything I say here is for “entertainment purposes only” so don’t sue me, ok?

For my calculations I am presuming you started at age 16 with your first part time job.  But honestly you can start this at any age and STILL MAKE A GREAT improvement in your retirement lifestyle.

(confused: math calculations video start)

So, let’s take $16 per day and allocate this to a Roth IRA, based upon historical averages of a 7% return, by time you are 59 ½ your investment of $264k total should be worth approximately $1.6 MILLION TAX FREE!

I am sure you are like “whoa, wait . . . what??”.

(bookend with train crash sequence after I say my line above)

Don’t worry I will explain all of this to you!

Throughout the years, of course, you paid your normal income taxes on the $264,000 you invested. 

All of your profit from your investments is tax free courtesy of Uncle Sam. 

Depending on your tax rate not only did you earn 1.3 million dollars through your investment, you saved over $900,000 of that in taxes! 

Using this simple Roth IRA strategy means you have $1.6 million dollars tax-free sitting in your account, not $700,000 after taxes.

What is an IRA?

Ok, so I keep saying “Roth IRA” in this video, what exactly am I talking about? 

First, an Individual Retirement Account (commonly referred to as an IRA) is specialized bank account with tax saving benefits when you invest for your retirement.  You have a lot of flexibility in what you “invest” in with your IRA, but for beginners a wide-ranging market cap fund would be best.  Check out my video how to invest in the stock market, link in the description box below.

Ok, now back to IRAs themselves.  Within the umbrella of IRA there are two primary types of IRAs that we will cover today:  Roth IRA and Traditional IRA.

At their core both of these IRAs function about the same.  Currently, if you are less than 50 years old, you can contribute a maximum of $6,000 per year to an IRA account. 

The key difference between a Traditional IRA and a Roth IRA is how you are taxed.

A Roth IRA is often referred to as a tax-advantaged retirement account. What I mean by this is the money you deposit, called contributions, to a Roth IRA are made after your payroll taxes are paid for that year. 

Then any profits you make from your investment grows tax-free. As long as you follow the rules for Roth IRA distributions, you’ll pay NO income tax when you take your money out in retirement.

Whereas a Traditional IRA is tax deferred.  What I mean by this is you do not pay any income taxes today on your contributions in a Traditional IRA, but when you withdraw money in your retirement years you PAY TAXES at that time.

As you can see from this chart, based upon our working example you can withdraw about $2,500/month from your IRA when you retire. 

You will notice that by using a Roth IRA vs a Traditional RIA you will save over half a million dollars in the long run based upon today’s tax rates.

You might be a little confused, and that is fine.  Let me give a very simple explanation, please note these numbers are not all inclusive.  Do not focus on the exact numbers here, I picked them for easy math so everyone can follow along.  The key is the concept behind Roth IRA that I want you to understand.

EX: If you made $10,000 at your job, depending on where you live in the country the tax man will take about 20% of that to pay both federal and state taxes.  This leave you with $8,000 left over, right? 

Now if you take all of that $8,000 and invest it into a tax advantaged account like a Roth IRA.  If you do NOTHING and leave that $8k in, you would have approximately $120k after 40 years. 

Ok, ok, I know a lot of numbers.  But stick with me because this is important. 

You have already paid your taxes 40-years ago when you invested your $8,000, remember you paid $2,000 to the tax man, right?  That’s all the taxes you pay.  All of your profit, the $120k is now tax free.

But, if instead of using a Roth IRA you invested in a Traditional IRA or a regular brokerage investment, again you would have the same $120k after 40 years, but here is the part that really sucks. 

Now you owe taxes on the full $120k, even if your tax bracket stayed the same that is $24,000 you owe to Uncle Sam.  Sucks, huh?

More important, today we are at historically low income-tax rates and no matter what your political view is, you can reasonably predict that in the future the tax rates will rise. 

Back to our $16 a day investment example; “Biting the bullet” now and paying today’s tax rate should save you even more than $562k if income tax rates rise by time you retire on your $1.5 million-dollar Roth IRA account.

So now, not only are you a millionaire, you also saved over $500k in unnecessary taxes.

Bonus facts

As a thank you for staying through to the end of the video.  If your employer offers a SIMPLE IRA retirement plan with matching you would be a fool not to take it. 

While not tax-advantaged like a Roth IRA, a SIMPLE IRA is tax-deferred.  I know, I know, I just spent the first part of the video explaining why a Roth is the best option.  But stick with me as there is a reason for this. 

YOU CAN DO BOTH!

Basically, a SIMPLE IRA is a Traditional IRA that you contribute money and more importantly your employer matches your contributions each year.  So, if you put $5,000 in there, your employer could contribute another $5,000 as well.  Instantly doubling your money!

You can invest up to $13,500 per year into a SIMPLE IRA. 

Following the same investment strategy as you did with your Roth IRA, in 41 years the contributed $570k plus your profits could value this account at approx. $3.4 million.

Best of all, remember you only invested half of the SIMPLE IRA money, your employer gave the other half (approx. $285,000).

Add both of your accounts together and you get a combined that is $4.5 MILLION DOLLARS between your SIMPLE IRA and Roth IRA when you retire.  Not bad huh?

But, wait . . . what if my employer does not offer a SIMPLE IRA? 

Well, you could find a better job, or better yet, start your own company and have full control over your destiny. 

Want me to make a video on how to start your own business?  Comment below and let me know!

Obviously starting these investments as early as you can in your life and sticking to it will return the best financial results.  If you only invest for a few weeks, then “give up on it” you will barely have enough money to buy a few McDonalds BigMacs. 

Trust me and learn from my own foolish mistake.  When I was 16, my parents helped me setup an IRA, and like an idiot, a few years later I cashed it all out, loosing almost half of it to tax penalties, all because I wanted some new computer gear.  

It wouldn’t be until my 30s before I finally started an IRA up again and because of this I have lost nearly half a million dollars of potential earnings.  DO NOT BE STUPID, invest for the long term, and when you retire you will thank yourself for it.

Now that I showed you how to retire with $4.5 million, how about you smash the like button so hard you break the glass on your phone?

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In closing a quick statement: I am not a lawyer, CPA, tax advisor, realtor, financial advisor, etc., etc., I have absolutely no licenses/certifications in anything related to these industries, I am just a dude on the internet. So, in full disclosure: the information I provide here is for “entertainment purposes only” and you should seek counsel from competent and certified individuals if you have questions.

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