The Roth IRA Explained in 60 seconds

The Roth IRA is an after-tax retirement planning account that grows tax-deferred and comes out tax-free in retirement.

The youtube video quickly shows the income and contribution limits for the Roth IRA and a quick example of a Roth IRA contribution phaseout.

The Roth IRA explained in 60 seconds the Roth IRA for 2021 is a retirement plan where the contributions go in after-tax. That's money that comes from your paycheck and it grows tax-deferred and all that growth in retirement comes out tax-free. Now there are contribution limits and that's $6,000 unless you're 50 or older you can do an additional $1,000 bringing that total to $7,000.

But there are income limits. If you're single or head of household, that limit is from $125,000 to $140,000 and for married filing jointly it's from $198,000 to $208,000. To give you an example of what that phaseout out or the reduced contribution looks like, if you're single earning $130,000, that's $5,000 over this limit and the range is $15,000. If we divide those two, we get .33 and we multiply it by $6,000 gives us $2,000.

Now if we reduce that amount from $6,000 minus $2,000, we get a max contribution of $4,000.

And that's the Roth IRA explained in 60 seconds.