5 Secrets of Roth IRA Millionaires — Including One Who Amassed $264 Million in His Roth IRA

Let’s address my provocative headline right now. Yes, one investor amassed a Roth IRA worth $264 million. Most of us will not be that successful. But if you heed some lessons from Roth IRA millionaires, you might become one too.

1. They started early

Warren Buffett’s investing lieutenant Ted Weschler grew his Roth IRA to $264 million — in part because he began socking away money for retirement at age 22. The earlier you start, the better, too.

Image source: Getty Images.

Check out the table below, showing how your money could grow at 8% per year:

Data source: Calculations by author.

2. They invested well

It’s also important to invest effectively. A great way is via a low-fee, broad-market index fund, such as one that tracks the S&P 500. Or spread your money across multiple index funds, perhaps including one or more dividend-focused ETFs.

You might also add some growth stocks to your mix, perhaps via a good growth-oriented ETF. But note that the market seems frothy these days, and growth stocks can fall harder than other stocks.

3. They kept taxes in mind

Your contributions to a traditional IRA can be deducted from your taxable income, lowering your tax bill, but withdrawals in retirement will count as taxable income. With a Roth IRA, your contributions have no immediate effect on your taxes, but withdrawals can be tax-free.

It’s true that, depending on your tax bracket now versus what you expect it to be in retirement, sticking with a traditional IRA may be best for you. But traditional IRAs also feature required minimum distributions (RMDs), which might bump you into a higher tax bracket. It’s also quite compelling, if you ask me, to be able to withdraw money tax-free from a Roth account in retirement.

4. They converted a traditional IRA to a Roth

Another thing many Roth IRA millionaires have done is convert money from a traditional IRA to a Roth. Part of Ted Weschler’s path to a $264 million Roth IRA was that in 2012, he converted his traditional IRA, then worth around $131 million, to a Roth. (He paid about $28 million to do so.)

Converting a traditional IRA could be a savvy move for you, too. And note that to ease your tax burden, you can spread the process over multiple years.

5. They lived below their means

Finally, a key thing that most Roth IRA millionaires have likely done is live below their means. If you want to have money to sock away in retirement accounts, you have to spend less than you bring in.

If you’re living above your means, or you’re living from paycheck to paycheck, think about whether there’s anything you can do to shrink your spending or boost your income.

These are the kinds of strategies that have helped lots of people build million-dollar-plus Roth IRA accounts. And you can probably act on a few of them yourself, improving your future financial security.

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