4 Steps To Become a Roth IRA Millionaire, According to Money Expert Steve Chen
Written by
David Nadelle
Edited by
Jasmine Browley
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When it comes to retirement planning, the best strategy is uniquely different for every person and the process can be confusing. That’s why there’s so many financial planners out there. However, setting up a nest egg for your non-working years can be easily created and passively maintained if you stick to tried and true saving and investing techniques.
Take it from someone who quit his job as a middle school math teacher and became financially independent at the young age of 33. Steve Chen, personal finance coach and founder of Call to Leap, is on a mission “to share with people how to become more intentional with money, including their spending habits and their investments,” he told QuickBooks.
In a recent 45-second Instagram tutorial, the former schoolteacher lays down exactly how to become a millionaire in retirement by investing consistently in a Roth individual retirement account (IRA) and taking advantage of the “Eighth Wonder of the World,” the basic wealth building strategy of compound interest.
Here are Chen’s four actionable steps to grow your net worth through a Roth IRA:
1. Choose a Reputable Brokerage Firm
Chen recommends Google Vanguard, Fidelity or Schwab, however, there are many great brokerage companies and online trading platforms that offer advice and accounts specifically geared to the investing novice.
According to MarketBeat, “The best brokerage account for beginners should have a user-friendly interface, provide educational resources and offer access to a wide range of investment options. This allows new investors to start their investment journey confidently and gradually learn the ropes of investing.”
Try Out: 5 Money Moves Wealthy People Make Before the Start of Any New Year
2. Open a Roth IRA
Brokerage sites will have clearly identified call-to-action (CTA) buttons that you’ll simply have to click. Once you’ve hit the Roth IRA to open a new account, you’ll need to fill out form with some basic personal information, including your name, birth date, Social Security number, contact info and possibly a driver’s license (or some other photo identification).
3. Connect Your Checking Account To Set Up a Monthly Deposit
On your new account dashboard, hit the Transfer button, to link your checking account and fill out how much and how often you want to fund your Roth IRA. Specifically, you want $583 going from your checking account to your Roth IRA every month. Make sure you click the Recurring occurrence option instead of One-time transfer.
Although they have income limits that determine if you can contribute — $146,000 to $161,000 for singles and heads of households, and $230,000 to $240,000 for married couples filing jointly are the phase out ranges for 2024 — the average person is allowed to invest up to $7,000 to a Roth IRA in 2024 and 2025 (and an additional $1,000 catch-up contribution if you’re 50 or older). The $583 that Chen specifies amounts to a hair under $7,000 for the year ($6,996).
4. Fund Your Roth IRA
Growing a Roth IRA is a long game, favoring the patient. So, your Roth account won’t grow much if you fund it sporadically and have a restless disposition. You have to adopt a game plan or a clear strategy like Chen’s, which establishes how much to contribute and how often, if you want to become a Roth IRA millionaire when you retire. You also have to allocate your contributions and hold on to them for many years.
This means buying a S&P 500 exchange-traded fund (ETF), which allows you to buy dozens, hundreds or thousands of securities within one single investment. To do this, return to your dashboard, click on the Quotes CTA button and choose a reliable performing fund, like the Chen-recommended SPY (Standard & Poor), VOO (Vanguard), IVV (iShares Core) or FXAIX (Fidelity).
Compound interest encourages and rewards individuals to start investing early to maximize growth over decades. According to Chen, if you consistently contribute the maximum allowable amount to your Roth IRA over 40 years, you should have over $3 million, given an average stock market return (the S&P 500 has gained about 10.5% annually since its introduction in 1957, per Business Insider).
“But that’s not the crazy part,” said Chen. “You would have only put in $280,000 of your own money and grew another $2.8 million of free money due to compound interest.”
