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A non-working spouse can open a Roth IRA if their partner has taxable income and is married and filing taxes jointly. In 2023, the contribution ceiling is 6,500 for those under 50 and 7,500 for those 50 and over.
Maxing out your Roth IRA every year is extremely important. Since you can't retroactively contribute money for previous years, you should try to contribute up to the limit each year. You have until the tax deadline (of the following year) to contribute for the current year.
I've seen a lot of people forget to invest money once they deposit it into their Roth IRA. This is a big mistake that many people make, because this is how they hope to grow their money for retirement. It is helpful to set up automatic investing for your account to avoid this problem.
Withdrawals from a Roth IRA before age 59 1/2 are generally subject to taxes and penalties unless they meet certain exceptions. Some of the most common exceptions include the ability to withdraw your contributions. Another is for first time home buyers where you can withdraw up to 10,000 towards the purchase without incurring taxes or penalties. There are a few others and each has restrictions, so do your own research on this one.
Maxing out your Roth IRA before your taxable brokerage account is very important. A Roth IRA is tax-free while the money grows and when you withdraw it. With a taxable investment account, you must pay taxes on dividend distributions, as they grow, and when you withdraw earnings from the account. From a tax perspective, it makes sense to make sure you've contributed the maximum to your Roth IRA before investing in your taxable account.
It is very important to understand your personal risk tolerance so that you do not invest in a way that does not suit your personality and long-term goals. Since money with a Roth IRA is never taxed, you want this account to be as large as possible. This could cause some investors to take more risk than they normally would in trying to grow this very large account. It's not worth it, so make sure you understand what level of risk is right for you.
You must be under a certain income limit to be able to contribute to a Roth IRA. I list what they look like in the video. If you're above them, you can still contribute to a Roth IRA through what's called a Backdoor Roth IRA. Make sure you understand the tax consequences before doing this.
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Disclaimer: This video is for entertainment purposes only. Everyone's situation is different, so do your own research before making a decision with your money. If you need help, contact a certified financial trustee before trying anything mentioned in this video. I prefer a fiduciary financial advisor who charges an hourly fee rather than an ongoing fee based on a % of your portfolio.
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