Latest / Earn Your Leisure / Set Your Kids Up for Life & Get a Tax Break! Roth IRA Secrets for Entrepreneurs

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Set Your Kids Up for Life & Get a Tax Break! Roth IRA Secrets for Entrepreneurs · Earn Your Leisure

• 0:01
  Speaker 1: Earners. What's up.
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• 1:51
  Speaker 3: So now let's go to number two. You want to
• 1:54
  Speaker 3: start with this rough ira. Man, this is your whale
• 1:58
  Speaker 3: bask field. I want you to cook and then I'm
• 2:01
  Speaker 3: just gonna like chef up with you.
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  Speaker 2: So the wroyth ira is another one of these strategies
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  Speaker 2: that we talk about that can be beneficial for not
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  Speaker 2: only for the adult, but for the child. So there's
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  Speaker 2: a few types. There's the roth ira UH, and then
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  Speaker 2: we have AH.
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  Speaker 1: There's a traditional ira and then.
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  Speaker 3: Direct So traditional ira is you put money into a
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  Speaker 3: retirement account and you get a tax deduction for the
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  Speaker 3: money that you put in, but it's taxable when you're
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  Speaker 3: in retirement. So IRA stands for individual retirement account. That's
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  Speaker 3: what it stands for, right. So people are familiar with
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  Speaker 3: four one K. That's what your job provides in.
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  Speaker 1: The four O three B if you work in some
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  Speaker 1: other same thing.
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  Speaker 3: Yeah, But if you want to do it for yourself
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  Speaker 3: as a self employed personal, just a regular you know, employee,
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  Speaker 3: you can do an IRA. And IRA is an individual
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  Speaker 3: retirement account. So the regular individual retirement account is what
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  Speaker 3: we just described, and then there's a WROTH. The wroth IRA,
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  Speaker 3: you're able to put money in for your retirement, but
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  Speaker 3: you don't get a tax deduction. But the benefit with
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  Speaker 3: the rough IRA is that the money's tax free when
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  Speaker 3: you take the money out. So one of the good
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  Speaker 3: things with being an entrepreneur is that you can employ
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  Speaker 3: your child.
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  Speaker 1: We talked about this before, yep.
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  Speaker 3: But even if you don't employ your child, you can
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  Speaker 3: set up a rough IRA for your child as long
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  Speaker 3: as your child is working. So this year, how much
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  Speaker 3: money can you pay your child this year?
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  Speaker 1: I think we got to fourteen thousand, three hundred.
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  Speaker 2: Fourteen thousand, three hundred and we get this question a lot,
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  Speaker 2: a lot, and yes, I'm glad that people are asking
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  Speaker 2: the question of like can I The child has to
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  Speaker 2: be of working age. So if you have a two
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  Speaker 2: year old that is not classified as a working age,
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  Speaker 2: I believe the working age is between seven to seventeen,
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  Speaker 2: and they have to be doing something that's functional. We
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  Speaker 2: work in a platform that actually has functioned.
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  Speaker 1: Right, So for my.
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  Speaker 2: Son, right when we actually record, he'll come down, he'll
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  Speaker 2: set up, he'll sweep, he'll clean the area. That is
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  Speaker 2: an actual functional duty that he is doing to help
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  Speaker 2: the business. So if you don't have a functional activity
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  Speaker 2: or a purpose for it, then it makes it tougher.
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  Speaker 2: But it has to be between the ages of seven
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  Speaker 2: to seventeen. You can't have your three year old performing
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  Speaker 2: a function or maybe you can't maybe you got a
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  Speaker 2: super child, but that's the age range.
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  Speaker 3: So the benefit okay, So the benefit with paying your
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  Speaker 3: child is that it's a tax deduction for you as
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  Speaker 3: an entrepreneur for your company, and it's tax free income
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  Speaker 3: to your child up to that amount. So if you
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  Speaker 3: pay your child ten thousand dollars, right instead of giving
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  Speaker 3: them allowance, right, Because now when you give somebody allowance.
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  Speaker 3: That's after tax money. You've already paid taxes on that money.
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  Speaker 3: So if you're giving them allowance to buy sneakers or
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  Speaker 3: to you know, do whatever, you don't get any benefit
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  Speaker 3: for that. But as an entrepreneur, if you can give
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  Speaker 3: them ten thousand dollars or five thousand or whatever you're
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  Speaker 3: giving them and it's salary, now you get a tax deduction. Right,
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  Speaker 3: you save money on taxes and it's tax fe they
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  Speaker 3: don't have. They don't have to pay taxes on that income.
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  Speaker 3: So that's beneficial for any entrepreneur. Now, where the raw
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  Speaker 3: firay thing comes into play is that you can contribute
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  Speaker 3: to a raw fira or an ira. But we'll talk
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  Speaker 3: about the rawal fira for now, but you can contribute
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  Speaker 3: to a row firara for your child that's working up
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  Speaker 3: to the amount that they're actually getting paid. So they
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  Speaker 3: if they have a regular job, they work in CBS
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  Speaker 3: and they got paid five thousand dollars, then they can
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  Speaker 3: have a raw fira up to five thousand dollars if
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  Speaker 3: you pay them. If you are an entrepreneur, you pay
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  Speaker 3: them five thousand dollars, then they can contribute up to
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  Speaker 3: five thousand dollars. Right, So the limit for this year
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  Speaker 3: is UH seven thousand thousand, that's the most right.
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  Speaker 1: So okay, this has.
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  Speaker 3: Beneficial for people to know and understand because once again
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  Speaker 3: it's just relatively short periods of time that could lead
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  Speaker 3: to large moneys over the cost of time. So if
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  Speaker 3: you are an entrepreneur, right, and you you have a
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  Speaker 3: business in mind, you you can be an entrepreneur and
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  Speaker 3: still have a job also. But if you if you're
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  Speaker 3: an entrepreneur, you have a business, Let's say that you
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  Speaker 3: you you paid your child seven thousand dollars right for
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  Speaker 3: the year, Now you can that's the tax deduction. You're
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  Speaker 3: going to save money seven thousand dollars only taxis Now
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  Speaker 3: you can take that seven thousand dollars and put it
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  Speaker 3: into a rough IRA. Now, the benefit with that is
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  Speaker 3: that now the money is actually invested. You're invested in
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  Speaker 3: the stock market. So let's just use an example. Usually
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  Speaker 3: UH working age is around twelve. So if we picked
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  Speaker 3: the ages from twelve to seventeen, to seventeen will be
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  Speaker 3: probably at last year in high school and then you know,
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  Speaker 3: after that point they're put they're an adult eighteen years old.
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  Speaker 3: So you go from twelve to seventeen, which is six years.
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  Speaker 1: Right.
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  Speaker 3: Let's say that you put seven thousand dollars in to
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  Speaker 3: a rough IRA every year for a child. Mind you,
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  Speaker 3: you're getting a tax deduction for this money. Anyway, you
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  Speaker 3: put seven thousand dollars away every year for six years, right,
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  Speaker 3: and let's say you invested it in QQQ. Right, historically
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  Speaker 3: over the last fifteen twenty years, think it's average over
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  Speaker 3: ten percent, So we can use ten percent as something
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  Speaker 3: that should possibly be a realistic number.
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  Speaker 1: That might and that might be conservative at this point.
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  Speaker 3: So let's say you invested that money ten percent a
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  Speaker 3: year untouched. Because the thing with the IRA is that
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  Speaker 3: is for your retirement, right, So when they retire, they'll
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  Speaker 3: have three point five million dollars. So the benefit with
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  Speaker 3: that is that you already made your child a multi
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  Speaker 3: millionaire in their retirement. Now to pushback for someone will say, okay,
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  Speaker 3: well the child has to wait till this sixty years
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  Speaker 3: old to get it. Well, my question is if somebody
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  Speaker 3: had a million dollars, two million, or three million dollars
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  Speaker 3: for you right now and said and you're forty, and
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  Speaker 3: said at sixty you will you will get this money.
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  Speaker 3: Would you be mad and you did nothing for it
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  Speaker 3: a couple of years of work when you was a child,
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  Speaker 3: would you be mad at your grandparent for doing that
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  Speaker 3: or would you look forward to the opportunity? Mind you, you
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  Speaker 3: can take money from a row fire eight early in
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  Speaker 3: the next there's some penalties that you have to pay,
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  Speaker 3: but you don't have to wait till your sixty.
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  Speaker 1: You don't have to wait till you sixty.
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  Speaker 2: And again, this is a conservative number, right, So we're
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  Speaker 2: talking about ten percent. There's years obviously we saw over
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  Speaker 2: the past three where the QQQ was trashed. The technology
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  Speaker 2: sector has gone up twenty five percent, right, it's going
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  Speaker 2: up twenty six percent, and then it's going down to twelve.
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  Speaker 2: If we just take those averages over the past five years,
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  Speaker 2: you're talking about way more than ten percent. The one
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  Speaker 2: thing that we know about the stock market is that
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  Speaker 2: it is going to appreciate eighty two percent of the
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  Speaker 2: time that SMP has increased over the course of the
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  Speaker 2: market's history. And so ten percent is a conservative number.
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  Speaker 2: So we're you're saying sixty, but that number could hit
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  Speaker 2: three million by fifty, right, And so it's all about
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  Speaker 2: deferring the gratification, right, Just knowing that it's there and
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  Speaker 2: letting it compound like it is the eighth wonder of
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  Speaker 2: the world. For a reason that money doesn't get touched,
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  Speaker 2: you'll be a millionaire. This is not something that's hypothetical.
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  Speaker 2: At that number, at a conservative ten percent, that's what
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  Speaker 2: it's going to average.
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  Speaker 3: And it's one of these things that it's not even
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  Speaker 3: it's just basic math. Right, This is that's like life
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  Speaker 3: assurance is the easiest way, but this is another damn
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  Speaker 3: guaranteed way to make your child a multi millionaire. Now,
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  Speaker 3: once we get we never said we said make your
• 10:01
  Speaker 3: child a millionaire. We never said there's gonna be a
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  Speaker 3: millionaire tomorrow. But once again, we're talking about generational wealth.
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  Speaker 3: So the whole point of it is that the child
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  Speaker 3: should be equipped to be earning money, to be doing
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  Speaker 3: things as an adult.
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  Speaker 1: Right.
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  Speaker 3: Everything that they've given is extra add ons for them, right,
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  Speaker 3: So this isn't like the only thing that they should
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  Speaker 3: be like relying on as a twenty five year old.
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  Speaker 3: But like I said, if you can, one of the
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  Speaker 3: biggest problems that we have in a society is retirement.
• 10:33
  Speaker 3: And they're already talking about cutbacks on Social Security. So
• 10:37
  Speaker 3: if you don't have to worry about retirement. How much
• 10:40
  Speaker 3: more free? I know people that take jobs just for
• 10:42
  Speaker 3: retirement benefits. Yep, you work a job for thirty years
• 10:46
  Speaker 3: just because it has a good pension.
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  Speaker 2: People will retire and go back to get a part
• 10:50
  Speaker 2: time job because they need the insurance.
• 10:52
  Speaker 1: Yeah. Sure.
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  Speaker 2: And here's the thing, right, like, yeah, fifty sounds if
• 10:57
  Speaker 2: you're sitting in your twenties and your thirties, Like, sixty
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  Speaker 2: sounds like a long Like we just I just turned
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  Speaker 2: forty three years ago.
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  Speaker 1: You just turned forty a year ago.
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  Speaker 2: At that same rate, you're still at that ten percent, right,
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  Speaker 2: just from them five years, from twelve to seventeen, that
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  Speaker 2: ten percent compounded turns to nearly six hundred thousand by forty.
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  Speaker 1: Yeah, Like, what did you get a.
• 11:17
  Speaker 2: Six hundred thousand dollars take in forty? I might have
• 11:19
  Speaker 2: missed it. No, I wasn't sitting there for you.
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  Speaker 3: So yeah, on five hundred and thirty one thousand dollars
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  Speaker 3: about forty. So, like I said, you don't. It's not
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  Speaker 3: like a locked up and a trust. You can take
• 11:28
  Speaker 3: money out of the IRA whenever you want. You'll pay
• 11:30
  Speaker 3: You'll pay an early penalty if you take it out
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  Speaker 3: before your retirement. That's important to notice. But if you
• 11:37
  Speaker 3: need money, like let's say you've got a brilliant idea,
• 11:39
  Speaker 3: you want to start a business, you can take the
• 11:41
  Speaker 3: money out. It's never been taxed before, so you pay tax,
• 11:44
  Speaker 3: you'll pay taxes on it, you'll pay a penalty tax.
• 11:46
  Speaker 3: But ideally it's better to wait because you'll pay no tax.
• 11:51
  Speaker 3: And like I said, keep in mind that money at
• 11:53
  Speaker 3: sixty three point five million is tax free. So when
• 11:57
  Speaker 3: you get your four one k, you're paying state and
• 12:00
  Speaker 3: federal taxes on it. So yeah, a million dollars is
• 12:02
  Speaker 3: really six hundred thousand dollars. This is three point five
• 12:06
  Speaker 3: million dollars tax free money. So I mean, that's just
• 12:10
  Speaker 3: the tremendtut Like I said, for a very short period
• 12:12
  Speaker 3: of time. You just you paid seven thousand dollars a
• 12:15
  Speaker 3: year for six years, and that could be two thousand.
• 12:17
  Speaker 3: Of course it's going to be a lower. But you know,
• 12:19
  Speaker 3: you could use the calculator to see, Okay, if I
• 12:21
  Speaker 3: put a thousand dollars and if I put two thousand
• 12:23
  Speaker 3: dollars and if I put fifteen hundred dollars in right,
• 12:25
  Speaker 3: what is that equal? But the bottom line is that
• 12:27
  Speaker 3: relatively small amounts of money in a short, relatively short
• 12:30
  Speaker 3: period of time equals huge amounts of money later on
• 12:33
  Speaker 3: in life.
• 12:34
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