With a maximum annual contribution of $7,000, it’s hard to fathom becoming a Roth IRA millionaire. But we’re here to tell you that it’s not only possible, it’s actually quite easy!
(There are also a bunch of ways to put more than the standard $7k contribution limit in your Roth each year 🤫)
Opening an account takes less than 10 minutes, and it’s completely free if you use a low-cost brokerage firm like Fidelity, Vanguard or Schwab. All you really have to do is make the maximum allowable contributions each year, then sit back and relax. Compound returns will work their magic and bring you to millionaire status eventually!
The toughest part is doing the right thing on repeat, making those contributions like clockwork, and then just waiting.
OK, here’s a breakdown of the steps to becoming a Roth IRA Millionaire:
1. Open a Roth IRA account
The first step in becoming a Roth IRA millionaire is pretty obvious- you need to open up a Roth IRA account!
But, don’t just open an account with any broker. They’re not all created equal. Make sure to pick a reputable one with incredibly low fees, like Vanguard, Fidelity, or Schwab.
This will ensure that your gains aren’t eaten away by bogus charges. Opening your Roth IRA at one of the big banks, for instance, is a massive no-no! They will charge you account fees, management fees, and probably give you advice that lines their pockets, not yours.
If you already have a Roth IRA, great! You can transfer it from broker –> broker if need. Just call the new broker you want to move to and enquire on the exact process.
2. Fund the maximum allowable contributions
Next, start funneling money into your Roth IRA account!
If you have a big cash pile sitting around, you can fund your Roth in one fell swoop ($7,000 transfer, all at once). But if you’re saving little amounts from each paycheck, consider breaking it up into monthly transfers (eg. $583 monthly).
Monthly contributions makes maxing your Roth IRA feel more achievable year on year. Be sure to set up automatic transfers too so that it’s one less thing to think about!
Max contribution 2024: The maximum allowable contribution for Roth IRA as it stands in 2024 is $7,000 per year (or $8,000 if you are over 50!). This amount typically increases a little each year, governed by the IRS.
Income limits 2024: One other rule to watch out for is income limits. The income limit for contributing to a Roth IRA in 2024 is $161,000 for single filers and $240,000 for married couples filing jointly.
If you make too much money, you won’t be able to contribute to a Roth directly. There are, however, a few different ways you can get money into your Roth if you are in the fortunate position of making too much money to make Roth IRA contributions directly.
3. Invest in low-cost index funds
A common newbie money mistake is funding an investment account, but then forgetting to actually invest the money! Please do not forget this VERY important step!
Becoming a Roth Millionaire will take a long time. And if you’re in the wealth-building stage of your life, since your goal is long term growth, your best bet is to build an aggressive portfolio compromised of mostly stocks. We always recommend broad, low-cost index funds for building wealth. Because they are highly diversified, and have a low (or even zero) maintenance fee.
Over the long run, index funds outperform almost all actively managed funds. And history shows your returns will average about 10% per year for investing in a total stock market or S&P 500 fund!
Let me stress these are average returns here because some years you’ll see even fatter returns! And in other years your portfolio will experience losses.
But stay the course no matter what happens in the short-term and you’ll make it to your goal!
4. Repeat every year
Now that you’ve got the swing funding your Roth IRA and buying index funds, simply repeat steps 2 and 3 every year.
Contributing and investing the maximum will get you to Roth IRA Millionaire status the fastest. Remember that the maximum contribution usually increases every year! Which means that your goal becomes possible on an even shorter timeline. Woohoo!
Also be sure that you are reinvesting any dividends!!! This means that all of your money and account growth is working for you. It makes a huge different in compounding over time.
5. Be patient
Based on 2024 contribution limits, assuming no annual increases and an 8% return, you’ll be a Roth IRA millionaire in just under 33 years! Check out the purple line below…
The only thing that stands between you and Roth IRA millionaire status is your willpower. It’s important not to touch your portfolio or tinker with it at all once you’ve set it up! Remember, slow and steady wins the race.
Other ways to fund your Roth IRA
There are a few other options to move money into your Roth account to help you become a Roth IRA millionaire faster.
- Check if your employer offers a Roth 401k. This would allow you to contribute $23,000 in addition to your IRA contributions. Roth 401k funds can roll over directly to Roth IRAs! Don’t be afraid to sock money away into both Roth accounts for faster growth.
- You could also use the Mega-backdoor Roth IRA. This strategy is recommended for very high income earners- here’s more on that!
- Backdoor Roth IRA. If you surpass the regular Roth IRA income limits, check out our post on performing Backdoor Roth IRA contributions.
Remember, if you’re over 50, definitely take advantage of the additional $1000 “catch-up” contribution. This will shorten the timeline to becoming a Roth IRA millionaire, and help you retire with a bigger pool of tax-free money!
How Many Roth IRA Millionaires are there?
According to Fidelity’s latest 2024 report, there are 398,594 people that have IRA account balances over $1m.
But, there’s no breakdown on whether these are Roth IRAs or Traditional IRAs. And the report only includes current, active Fidelity clients.
So there’s no exact answer.
BTW — who care’s about what everyone else’s balances are… The more important thing to focus on is growing your Roth IRA balance. 😉
The Bottom Line
Becoming a Roth IRA millionaire is not only possible, it’s actually quite easy! Just set up a free online account with a big broker, fund it annually with maximum contributions, and invest in low cost index funds. Boom – you’ll reach millionaire status in your Roth IRA account over the course of a few decades.
One last word of advice… While it’s cool to become a Roth IRA millionaire, don’t neglect other types of retirement accounts. For the most flexibility in retirement, you’ll want your funds mixed across both pre-tax and post-tax investment accounts. Like a Traditional 401k, HSA, or a regular brokerage account.
So what are you waiting for? Head over to your favorite low cost broker, open up a Roth IRA, and start building that wealth! 💪
Related posts:
- How to become a millionaire from nothing
- Backdoor Roth IRA strategy for high income earners
- How to buy a rental property
