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A Roth IRA can be the most powerful and flexible of retirement plans. It is not tied to your employer, is often offered both fee- and commission-free by brokers, and allows tax-free compounding throughout the original owner’s life.

Yet, with fairly limited contribution amounts — in 2024, it’s $7,000 for those under age 50, $8,000 for those aged 50 and up — it might seem difficult to build a decent nest egg in a Roth IRA. These five secrets of Roth IRA millionaires show both that it’s possible to get a balance of $1 million or more in your account and what some key benefits are if you’re able to make it happen.

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No. 1: Start early

Perhaps the most important thing you can do to build a million-dollar nest egg in your Roth IRA is to start contributing to one as early in your career as possible. At $7,000 per year of contributions, it will take a bit over 28 years to reach $1,000,000, assuming the market compounds near its historical long-run return rate of around 10% annualized.

Of course, stock market returns are never guaranteed. Still, it’s good to know there’s a fairly straightforward path to reaching millionaire status within a Roth IRA in the course of a normal working career. Indeed, even if it takes you a few years to get settled in your career before you’re able to start contributing, you still have a decent shot of getting there by retirement.

No. 2: Double up with your spouse

If you’re married and eligible to contribute, both you and your spouse can probably contribute to Roth IRAs, even if only one of you is working. This is a great way to get up to $14,000 per year — $16,000 per year if you’re both age 50 and up — into Roth IRAs for your household.

This can be useful if one spouse is between jobs or taking time off from paid work to raise the kids or help with an aging parent. If you can cover your costs on one income and sock a bit away for your future, it’s a good way to help keep retirement on track, even during those periods with only one spouse working.

No. 3: There’s a backdoor way to get money into a Roth IRA

Note that one risk when it comes to Roth IRAs is that your contributions will start to get limited based on your adjusted gross income. If you’re single and have an adjusted gross income of over $146,000 in a year or married filing jointly with an adjusted gross income above $230,000 in a year, your contributions start getting limited.

The key is that it’s based on your adjusted gross income — not your salary. Get a bonus? That counts. Have an investment in a taxable account that gets bought out? Any capital gains get counted as part of your adjusted gross income. That makes it difficult to directly contribute to a Roth IRA once your income starts getting close to those contribution limits.

Fortunately, there’s a way around that, known as a backdoor Roth IRA contribution. Basically, you contribute to a traditional IRA, then quickly convert the money to a Roth IRA, paying any conversion taxes due.

If you don’t have any other money in your traditional IRA, the immediate tax impact is largely the same as if you had made a direct Roth IRA contribution. However, if you do have other money in a traditional IRA, a pro-rata rule means you may face higher taxes on that backdoor Roth than if you had been able to contribute directly to one.

No. 4: Roth IRAs could help you keep your taxes and costs down in retirement

The same conversion rules that let you create a backdoor Roth IRA also let you convert your traditional-style retirement plans to your Roth IRA after you’ve retired. While you will face immediate taxes on the money you convert, retirees with significant traditional-style retirement account balances might still find such conversions worthwhile.

This is because traditional-style retirement accounts are typically subject to required minimum distributions (RMDs) once the account owner reaches age 73. On the flip side, Roth IRAs are never subject to RMDs within the original account owner’s lifetime.

Those RMDs are based on your age and traditional-style retirement plan account balances, not on how much you need to spend to cover your costs. The older you get, the higher the percentage of your balance that must be withdrawn. Those withdrawals can trigger direct taxes, make more of your Social Security taxable, and subject you to higher Medicare Part B and Part D premiums.

By putting more of your money into a Roth IRA, that money can compound tax-free for the rest of your life — after you pay the initial conversion tax — if you don’t need to withdraw it to spend. That reduces the money subject to those future RMDs and the potential knock-on effects they bring.

No. 5: Your heirs will thank you for leaving them a Roth IRA

All qualified retirement accounts — including Roth IRAs — are subject to RMDs once the original account owner dies (with a limited exception for spouses). If you leave money to your heirs in a traditional-style retirement account, those RMDs are generally taxed as ordinary income to those heirs.

While your heirs (aside from your qualifying spouse) will eventually have to withdraw the money from a Roth IRA you leave them, they will not owe income taxes on those withdrawals. That can be especially helpful to them if you happen to pass away while they’re near their own peak earning years, where their tax rates could already be fairly high.

Get started now

Put all five of these secrets together, and a Roth IRA can be an incredibly powerful part of your retirement plan. The earlier in your retirement savings journey that you can put one to work for you, the more you can potentially benefit from it.

You will never again have more time before you retire than you do right now. So, make today the day you start making plans for how you can best put a Roth IRA to use for yourself. If you do join the ranks of Roth IRA millionaires, you’ll very likely be glad you took that all-important first step.

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Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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