Using Roth IRAs to Build Tax-Free Generational Wealth


Description

In this session, I dug into one of my favorite parts of the Roth IRA — its ability to create tax-free wealth that can be passed on for generations. We talked about contribution rules, the power of compound growth, and how simple deals today can explode into millions over time when held inside a Roth. I also shared strategies for helping your kids and grandkids get started, why the five-year rule matters, and how inherited Roth IRAs work.


Key Takeaways

  • The Roth IRA is one of the only tools that lets you create lifetime tax-free income.

  • Contributions can be withdrawn anytime, but earnings require meeting the five-year rule and age limits.

  • Inherited Roth IRAs allow your heirs to enjoy tax-free growth — but they must take required distributions.

  • The earlier you start contributing, the more compounding works in your favor.

  • You can help kids and grandkids open Roth IRAs if they have earned income.

  • A single small deal inside a Roth can multiply dramatically over decades.

  • Always title investments properly to keep them compliant inside the Roth.

  • “Pay tax on the seed, not the harvest” — that’s the power of the Roth.


Action Steps / Exercises

  1. Five-Year Rule Check: Write down the year you opened your Roth IRA and when it will hit the 5-year mark.

  2. Family Wealth Plan: Identify a child or grandchild with earned income and outline steps to help them open a Roth IRA.

  3. Compounding Drill: Run numbers on a $10,000 deal growing at 12% inside a Roth over 20 years — write down the total.

  4. Heir Prep: Make a note to update your Roth beneficiary forms to ensure your heirs inherit properly.

  5. Seed vs. Harvest Reflection: Write in your own words what “pay tax on the seed, not the harvest” means.