Becoming a Millionaire: Roth IRA vs 401K (What makes the MOST PROFIT)

Here’s a topic that’s been coming up a LOT recently, and this is an extremely confusing decision: What’s better to invest in - Roth IRA or a Traditional 401k? Here’s my thoughts, enjoy! Add me on Instagram: GPStephan

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So lets first start with some background on the almighty Roth IRA:
First, like I just mentioned, all of the profit generated in this account is tax free after the age of 59.5. That could save you a LOT of money by the time you retire, especially if you begin investing in this early on.

Second, with a Roth IRA, you can withdraw whatever money you contribute to this account, at any time, tax free, without paying any penalties.

However, here are the downsides:
First, with a Roth IRA, you contribute POST TAX MONEY - this means the money that’s left over after you’ve already your paid taxes on it. And as we all know, the money you have left over AFTER taxes is a LOT smaller than before the taxes were taken away…this means you’ll have LESS of your money to invest upfront, all things considered.

Second, if you want to withdraw your PROFIT from this account before the age of 59.5, you’ll be subject to a 10% penalty, and you’ll have to pay normal taxes on that profit.

Third, the contribution limit for a Roth IRA is capped at $6000…so if you want to contribute more than this, well, you can’t.

But how does this all compare to the Traditional 401k?

Well, the 401k is an employer sponsored retirement account where you contribute PRE TAX money…meaning you won’t pay any taxes on the money you invest in this account. Now because you don’t have to pay taxes on the money you contribute, you have even MORE money left over to invest instead of paying it to the IRS, allowing that extra money you saved in taxes to make YOU even more money.

Pros of a Traditional 401k:
You contribute pre-tax money, meaning you don’t pay taxes on the money you put in this account, and can be a huge tax deduction.

Secondly, you can contribute up to $19,000 per year in a 401k…that’s more than 3x HIGHER than you can contribute to a Roth IRA.

Third, some employers offer a 401k employer match - which means they actually match your contribution, dollar for dollar

Downsides to the traditional 401k:

The first is that you’ll end up paying taxes on your money when you begin withdrawing it from your account after the age of 59.5. With a 401k, you’re basically saving money on taxes NOW so you have more to invest upfront.

Secondly, if you want to withdraw the money prior to the age of 59.5 for anything other than financial hardship, you’ll be subject to paying a 10% penalty on your money and you’ll owe taxes as though this money is ORDINARY INCOME.

Third, you’ll be forced to begin withdrawing your money at the age of 70 1/2…and for some people who prefer to continue saving it and letting it grow, well…you can’t.

And the right mix is - in my opinion - a slight balance between the two. I still contribute a bit to my traditional 401k just to hedge my future options, even if I have no idea if it’ll be the smart choice in the future…again, JUST IN CASE. I also go heavy on the Roth option, too, because I know it’ll be tax free in the future, and I don’t have to question what future tax rates may or may not be.

My ENTIRE Camera and Recording Equipment:

[GrahamStephan]

Hey everyone! Made a second channel I could post some bonus content to...go subscribe! Got an INSANELY good video being posted there this upcoming Wednesday the 27th!

[NicholasBall]

The most significant financial blunder I ever committed was with my 401k. During the six years that my kids were in college, my company offered a Roth 401k, but I only began contributing in the third year. Due to assisting my children with expenses, I qualified for tax credits, resulting in an exceptionally low effective tax rate. It was precisely during this period that a Roth account would have been most beneficial! Despite this misstep, I still managed to retire with approximately $350k in my 401k.

[PremSteve-ygde]

It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.

[ClementRusso]

Choosing a Roth IRA is advantageous as it uses after-tax funds and allows tax-free growth. When I retired, I had $3M million saved, and I won't be taxed on my withdrawals.

[Pambegay]

A couple of years ago I considered getting into 401k without much knowledge and decided to have a consultation with a fiduciary, and it was incredibly insightful. A few years down in, I truly cannot stress enough how helpful experts in this field are! Great video brother.

[Rochelletrem]

With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.

[influencerunchained-digita]

Graham teaching us what SHOULD be taught in schools. Excellent, detailed breakdown! Thank you!

[BeverleeR.Ziegler]

Roughly $120K in my portfolio are in tech/TSLA stocks, can I get an advice on any other stocks that I can acquire to diversify my reserve across multiple markets while creating a comprehensive portfolio allocation that balances my concerns of risk aversion and returns that meet yearly inflation.

[dylanmoris]

The financial system has been artificially pumped for over a decade to ensure big pockets were lined; and now those same hands will make a fortune in the largest transfer of wealth in human history by shorting it on the way down. Inflation does have a roll, but that's to keep everyone panicked, and focused on their bills and expenses, rather than focus on the capital crimes of politicians and corporations, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio, what’s the best way to take advantage of this bear market??

[odigomez]

I personally got both. Got a 401k through work with an employer match (which is basically free money) and a Roth IRA. If you can do both, do both.

[carolitadominguez]

I just started working at Chase as a part time teller and I was able to start my 401k. I was able to contribute the highest percentage and get the employer match. I’m really excited to see how it grows.

[KingDavid-jjtk]

I've bought most of your stocks picks but I'm still unable to make profit. However, a few investors I read about were able to make profits of upto $50, 000 monthly, so am I doing something erroneous? please i need some hints on how to make enormous profit

[matturner]

As a soon-to-be retiree, keeping my 401k on track after a bumpy 2022 is a high goal. I've read about investors generating up to $250k ROI in this present sinking market; any suggestions for increasing my ROI before retirement would be greatly appreciated.

[MrDrew]

I invested 2 dollars on a Powerball and I'm looking at a 600+ million dollar return. let me see you do that with an Roth ira or 401K. then after I collect my cash in going to invest it all in opening an avocado toast franchise. So I've got it all figured out.

[AllisonSherman]

With changes in the economy leading to instability in the stock market, some individuals may face a decrease in their investments in an effort to benefit from the current market conditions, I am considering liquidating my $725k portfolio consisting of bonds and stocks. Someone else in the same situation? Please tell me in the comments!..

[Riggsnic_co]

We experienced the peak of our era, and now it is gone. Recession is tanking everything including 401K. My retirement equities portfolio of $750K is in the reds. I keep losing because of inflation. This world will fall to the corrupt rulers in the same way that Rome did. I'm sorry if you're thinking about retiring and you're worried that your pension won't be enough to meet the rising cost of living. Horrible foreign policies everywhere, bad regulatory policy, bad fiscal policy, and bad energy policy.

[khale]

With 401k, you can also avoid paying state taxes in states with income tax. Later you can move to states with no income tax.

[richardmadison]

Jobs will pay your bills, business will make you rich but investment makes and keep you wealthy, the future is inevitable

[chriswilliams]

There is no single news on the internet about stocks within the last few months...Now, my dilemma is this; Given that stocks have been underperforming and considering the current housing market, will it be better to invest into Real Estates or into Stocks. Which would yield better output. Considering a young mid income, short term person with not so much spare time.

[alfredalbert]

I’m a dividend investor, my wife and I have invested in the s&p500, both through my TSP with the government and through fidelity in her 401-k. Cashed out 370k from the S&P and invested with a full service broker.. Until about 3years ago we were 100% in the s&p after over 30 years. I’m retiring at the end of the month at 59, while my wife will retire next year at 54. We currently have 5.7 million in our tex deferred savings.