Episode 25 – Investing in IRAs

Investing in IRAs – The 2023 Traditional IRA/Roth IRA contribution limit has increased for those qualifying under 50 years old to $6,500, and to $7,500 for people ages 50 or older! Still haven’t maxed out your 2022 contributions by investing in your IRA? No sweat, you still have time before tax day. On this podcast episode, I’ll help you feel confident in understanding:

The benefits of investing in IRAs

All the tax advantages that come from investing in a traditional IRA or a Roth IRA.

Contribution limits/deadlines

Stay up to date with how much you can contribute and when, because the IRS changes these from time to time.

How to open the account

I share the brokerage firms where you can invest in an IRA.

Investing in stocks

Set yourself up for retirement by growing your money, because cash loses value to inflation.

In the previous episode, I talked about the end of year decisions that lead up to investing an IRA.

Wanna learn more? I’ll be walking you through the details in my FREE investing workshop on Sunday, Jan 15th @ 7:30pm et/4:30pm pt! There will be a live Q&A with me. Sign up here!

Podcast Transcript Below

Hola everybody. Welcome to the Unicorn Millionaire Podcast. I’m your host, Charly Stoever, a non-binary Latinx money coach, helping my first gen clients become millionaires. I’m a formerly undocumented Mexican American and currently digital nomad traveling all over the worlds. Super excited to have you here along with me on my journey.

I talk about personal finance, money, mindset, twerking, unicorns, rainbows, you name it. We’re here, we’re queer, and we are going to build wealth for ourselves and our communities.

Okay, so happy New Year everybody. Today I wanted to talk to you about investing in IRAs and Roth IRAs. I’m gonna talk to you first about my experience with these investment accounts and then talk about the benefits, the difference between regular IRAs and Roth IRAs. Mention the contribution limits and the different deadlines that I keep an eye on as an investor.

Then I’ll talk about where you can open up your IRA if you haven’t done so already. And then I’ll end with what to invest in. And don’t worry if you missed this. I’m gonna talk about this in detail on my investing in IRA’s master class on January 15th. And you can sign up at the link. I’ll put in the show notes.

So January’s here. I’m super excited every year come January. I’m really ready to start freaking investing in my Roth IRA. So this is something that I have been doing. I have been maxing out the contribution limit of my Roth IRA since I even became aware of investing. When I was hustling my butt off living paycheck to paycheck in Washington DC when I was 26.

I was working as a bike tour guide, even though I was a college graduate. I was underpaid and exploited and I was like, this is not it. Don’t want 60 or 70 year old me to be suffering. And I’m not gonna have this much energy in my twenties for so long. I need to start investing in my own retirement.

And I had no idea what was going on. But luckily, I had a friend who I was dog sitting for who was a financial advisor at Charles Schwab. She was kind enough to sit me down for free for an hour. And she helped me roll over an old annuity account that I’d had as a teacher when I was working at Brook Charter School in Roxbury, Boston.

It was just really eye-opening for me to realize that I didn’t have to be making a lot of money to get started investing. What mattered was that I was just freaking getting started and not overthinking it because I was thinking of my future self and that I didn’t want to continue suffering. I wanted to make sure that I was good in the future, and that was what opened the windows for me and what allowed me to ask for help and get started investing.

And I didn’t know anything about stocks and bonds, any of that stuff, but my friend got me started with a robo-advisor fund. The minimum investment for Robo-advisor at Charles Schwab at the time, which I think they still are now cuz my clients are still opening them, was $5,000. So robo-advisors were great for me when I was just starting, cuz I was basically telling it what my risk tolerance was and when I was trying to retire.

I put in my basic information, like my age, what my goals were, and then the robo robot picks the investments for you and then that’s it. If you wanna take out money, it will decide what to sell. But in the individual retirement account, the goal is to leave that money in there for as long as possible.

You shouldn’t be seeing your retirement account like an emergency fund. That is the last resort for you. When you’re building wealth, the priority is just to fund them, invest, and then go on your life doing hot queer shit. In my case. My friend helped me get started with a Roth IRA when I was 26. And she also opened a taxable brokerage account for me.

So it was for a couple of years, I think it was only for a year. Yeah, that I had the robo advisor. But it was interesting to be able to log in my account and see that the money was fluctuating. Some days it would go up, I don’t know, 80 bucks, a hundred bucks. Some days it would go down by $50. But it gave me a lot of peace of mind and relief knowing that my money was finally being put to work. Not to mention outpacing inflation too.

I see a lot of people asking about, which savings account has the highest interest rate, yada yada, 3%, 4%. That doesn’t matter. Don’t get distracted. Right now, inflation is still at about 7.1. So the inflation rate is higher than these saving account interest rates, so you’re still losing value to inflation.

So your non-emergency fund money, if you’re not investing for short term goals that need you to have the cash ready, that is where I want you to start thinking about how can I invest my extra cash? Because self-sabotaging, a form of that is just to keep tens of thousands of dollars in cash thinking you’re doing the right thing because it’s comfortable and safe for you.

While in the long term you’re losing your money’s value every day to inflation. So this is why I decided to start investing, was to just make sure my money was growing literally in my sleep. So there’s lots of different investment account types, but my number one go-to is the IRA, whether it’s the regular or the Roth, depending on how much your income is.

Whenever my clients ask me which account should I start investing in, now is the time to buy in the stock market. I always go to the IRA and the 401(k). Let’s focus on your retirement accounts cuz those are usually the accounts that you can afford to be the most aggressive in because you’re not only penalized for taking that money out, but the benefit is that it will be able to grow tax deferred or tax advantaged.

So if you have a Roth IRA like I did, I was putting post tax money from my paycheck. Contributing a hundred bucks here and there with the goal of maxing out the limits. And I think back in 2017, the limit was something smaller, like $5,000. The IRS will periodically raise these limits to adjust for inflation.

Oh, what’s interesting though is that the IRS will allow you to contribute hella more money to an employer sponsored 401(k) than they will to an individual retirement account. And I believe that’s because they just want you thinking that, oh, I can contribute more to my 401(k). I better stay with this employer and not start my own.

You can also see that as, okay, max out my 401(k). I believe the limit for your 401(k) in 2023 is $22,500 and additional money. Extra money. Instead of investing that still in a brokerage account, you can start putting that away every year in an IRA, a Roth IRA, depending on how much you make a year, cuz that will affect your ability to contribute to these accounts.

The Roth IRA for me is my number one. It’s my main squeeze. It’s my Puerto Rican princess. I’m like the sugar daddy for my Roth IRA every year. I’m maxing that ish out before it’s even like March or April. I’ve maxed that ish out. I’ve put thousands of dollars into that.

And every year I’ve done that. So every year for about six years, I’ve maxed it out and I’m thrilled and excited to be maxing it out again this year cuz it’s gonna sit there and grow for decades to come so that I can continue traveling the world. I already feel like I am semi-retired because I can go wherever I want to, wherever I want to and work for myself and have financial independence to just literally go wherever I want.

whenever I feel like depending on the visas. I feel like, yeah, it’s gonna be super exciting to see what it will be like cuz it’ll be retirement, like on steroids when I’m starting to able to take out my money that’s been growing for decades in the Roth IRA. In the Roth IRA, when I take the money out, I won’t have to be worrying about taxes cuz I already pay taxes.

So the difference I get asked a lot between regular IRAs and Roth IRAs is that with the Roth IRA, that’s one that I usually say folks who are in a lower tax bracket and who are younger. It might be a better idea for you to think about that. It’s really up to you and your choice if you wanna do a Roth IRA, regular IRA, or both.

With the Roth IRA, because on my W2 I’ve never made more than $45,000 working for anybody else I definitely qualify for Roth. I just checked the income limits for 2023 for Roth IRAs, you have to be making something less than $150,000 if you’re filing single. The numbers are higher if you’re filing jointly and married.

Again, check with your tax person. This is not tax advice, but just make sure you check the numbers. I usually just do a Google search and check for the most updated IRS info on these limits to make sure that I’m good and that my clients are good. So I’m definitely below the Roth IRA threshold, which was what allows me to contribute to the Roth.

If I were making more than a hundred fifty three ish thousand a year, then I would still be putting money into a regular traditional IRA, but that money would be considered pre-tax money that’s not yet taxed. I have a client who’s older and getting closer to retirement, and she’s already in a higher tax bracket making high six figures.

So I told her that maybe you might not want to do the Roth IRA. Maybe since you’re already in a higher tax bracket, it won’t make sense for you. To get taxed so much now since you’re closer to retirement.And I don’t want you overthinking this and worrying about, oh my God, should I do the Roth IRA or the regular?

The point is to just get freaking started and picking one. As long as you’re abiding by the limits and you’re making earned income that you’re reporting to the IRS, it’s better to do that than to just have your cash sit there. One of my clients almost gave me a heart attack because they showed me $10,000 in cash that was just like sitting in their house.

And we joke a lot about like what this means to me because I’m very like, invest, invest in class. Your cash is losing value to inflation. And then they showed me literally the cash flow of $10,000. I almost had a heart attack because I was just thinking of how, first of all, unsafe it is to just have all this cash in your house.

But second of all that you’re losing so much to inflation and then they put that in a savings account. And then I was like, okay, I can breathe again. But they’re also investing tens of thousands of dollars. They opened up a robo-advisor fund, a self-managed fund. All of this with my help. I walked them through the entire process cuz they received an inheritance of almost $200,000.

And they hadn’t been touching it for months because they were just scared. So that goes to show that making more money doesn’t automatically heal your money shit and your money, drama and trauma. What matters is doing the work up here. A lot of self-worth work and just getting started, even if it’s in smaller amounts.

Once my clients start investing a couple of hundred here, a couple thousand, then it is just easier for you. It becomes muscle memory and it just becomes not a big deal to just place trades of several thousand dollars at a time.

In terms of limits and deadlines, our Aries goddess, Gloria Malone recently asked me when we were doing a sales call for my quarterly meetings with my returning long-term clients, she was kind of feeling the FOMO that she wasn’t doing enough because she felt like she hadn’t maxed out her 2022, Roth IRA contribution.

It was already in December, and I was like, don’t worry, you got this. You still have until tax day of next year as well. So the calendar year for 2022 is over. Even though it’s 2023 every year, you still have those three or four months to do catch up contributions. So, for example, if you qualify and you’re all good, if you’ve never invested in IRA, you can technically, you can contribute.

If you’re under age 50, you can contribute $12,500. But the important part I always tell people is since the last year’s limit under age 50 is $6,000, you have to mark that contribution as 2022 and you have until tax day, I believe is April 18th of this year to do that and then boom, don’t contribute more.

Don’t mark more contributions past that as 2022 cuz you’ll get penalized if you over contribute. Or if you don’t even qualify for this. So that’s why I mentioned knowing if you qualify is super important. There’s nothing worse than trying to invest and then getting penalized for it. I’ve never been penalized because I’m careful.

I always look at what the requirements are and I’m very careful about knowing what the limits are as well. So imagine that you catch up. It’s January, February, March , first half of April, put in six Gs in market for 2022, and then boom, you can start after you’ve maxed that out, start putting in money and 2023 limit is $6,500.

Max that for 2023 which is what I’m going to do. I max out my Roth IRA at the beginning of the year every year. So today it’s gonna be what January 3rd is. Today I’m in the future, which I love cuz I’m in the Philippines . I have to be like, okay, what time is the stock market opening so that I can place trades.

So tonight I’m going to be transferring a thousand or a couple of thousand and still haven’t decided yet into my Roth IRA. Making sure I max 2023 cuz I’ve maxed out my 2022. And then I’m gonna be buying stock when the stock market’s open. Or sometimes I’ll even just put in limit orders to buy stock before the stock market opens.

You can do pre-market hours as well. You don’t have to wait until the stock market opens cuz for me that that’s at 10:30pm. I’m not a night owl. I’m a morning person. I think that’s the one thing I don’t like about being on the other side of the world. The stock market doesn’t open at 9:30 AM Eastern for me anymore.

Which like I used to day trade a lot, especially 2020. That year was day trading heaven. I remember being super excited to have my cafecito, my cold brew, hella queer, and then be day trading, da da da da da. And now I’m like, thank God I don’t day trade anymore. I find much more fulfillment from my money coaching business, and I’m helping so many more people than I helped when I was day trading.

I was helping nobody except myself. Sometimes you gotta do what you gotta do, but, I mentioned this to, to share with you how my brain works and how excited I am about investing in the stock market and knowing that you can trade in the pre-market when the stock market opens and after hours. And that’s something that I help my clients understand.

But I’m also very careful about placing limit orders to protect yourself from market risk, cuz when I was working as a stock broker, people would put in those market orders and the stock market could fluctuate and go to potentially infinity. And you can lose your money if you’re not careful placing market orders.

So I’m all about placing limit orders and making sure we understand exactly what we are trading, buying, and selling in our investment accounts. So where can you open up your Roth IRA? I’ve mentioned already that I always started out with Charles Schwab, and that’s a low cost brokerage firm.

Another option that people use is Vanguard and Fidelity. But honestly, I had a client who was at Fidelity and she did not like the interface. We were looking at her accounts and after I showed her mine, she’s like, you know what? I’m just going to move everything to Schwab. Schwab’s interface is pretty.

It’s not pretty, it’s prettier. But I like it because it’s basic, it’s easy to get ahold of. I like that it’s not pretty, it’s not gamified like Robinhood, which I’ve never opened. I think Robin Hood’s a scam cuz it gamifies trading and makes it seem like a casino. I’ve heard things about how like when you place a trade, confetti flies around.

I’m not about that. Investing is not a game. Investing to me is not something we do for short, short term buck. It’s not an emergency fund. It’s not a payday Loan. Investing is something that we do consistently for years so that our money can grow over the long run. And what’s exciting about investing now is that all of 2022, basically as soon as interest rates went up, stock market went down.

And instead of freaking out and losing my ish and being like, oh, recession, recession. As a stock broker, I’m trained to think opposite of how most people think. When the stock market was down during COVID, myself and my colleagues were salivating because we were like finally after a 10 year bull market run, finally, stocks are cheap and we can go in and buy stuff.

I was only making $45K at the time and I was thrilled that the stock market was crashing because I had my emergency fund, was debt free and I was so excited to invest half my paycheck. I was investing in my Roth 401(k), which that’s another way to take advantage of a down market, is to just increase your contributions from your 401(k).  

Then I was like, this is fucked up that I’m excited. I’m not even making relatively that much and I’m gonna quit my job and get my free Masters and start my own money coaching business. Which is why two years later I’m talking to y’all about this. You don’t have to be making tons of money to get started, but if you are making a lot of money and you’re stressed out and feeling like you’re not doing enough with your extra money, investing is a great way to go from feeling guilty to being in the abundance mindset so you can invest for yourself, show your family members how to invest so they’re less stressed out about money.

Understand stock market fluctuations, how inflation works. And so at the end of the day, you can give your money, you can invest in other business owners, other marginalized business owners, nonprofits that you care about. So that your money will actually go to helping the cause that you care about and not just going to like somebody’s, like a higher upper level person’s paycheck.

I have a lot of thoughts about the nonprofit industrial complex and I did a post about being a socially conscious investor on my blog at Unicorn Millionaire Blog. You can just look for that blog post.

I’m very into investing money, not just in the stock market, but using that money, selling the stock, using that cash to invest in business coaching, or I paid my friend to help me with my search engine optimization and she’s Latina.  I paid her four figures to help me with that on my website. And I’m just all about keeping the money finally within our community. I view that as a form of mutual aid. Because I love what I do and I get paid to do it. And I get paid to help people who are queer, marginalized, who share my experience.

I love my clients, and we don’t have to worry about, oh, is this a safe space? Like I’m a living, breathing, safe space just for being myself. That’s why two years later, after COVID stock market crash, I’m here today reminding you that it’s important to just start investing if you haven’t already.

Especially if you have extra cash too. I guarantee you that it will pay off if you just let go of the guilts and start making money moves consistently. It’ll pay off over time. I had no idea that at 32, never having made six figures working for anybody, that I’d be traveling the world financially independent, like not needing an alarm to wake up and dictating my own schedule and talking with amazing freaking clients, uh, from halfway across the world.

I’m an example of what happens when you’re disciplined about your money. But you also start asking for help because we’re not made to do everything alone. Humans are community based. And a lot of us are feeling burnt out because a lot of the things that we have done historically for centuries in community, we have to, well, we don’t have to, but we feel like we have to do this things ourselves because capitalism, at the end of the day, it is all about individualism and feeding us that narrative that, oh, we have to pull ourselves up by our bootstraps and do things individually.

Self-made millionaires, 30 under 30, like all this self-made crap is not where it’s at. I’m all about community and us lifting each other up together. So speaking of community, I’m hosting my first free masterclass of the year. It’s going to be on January 15th where we’re gonna be talking more about individual.

Retirement accounts, whether you wanna invest in a traditional or a Roth IRA, I’m gonna be opening it up with a meditation to get us grounded, because the more and more I do this work, the more I realize it’s not about learning the keywords. It’s not about the financial literacy. It’s about creating a sense of safety for ourselves and visualizing our future selves so that it can motivate us to feel excited.

To invest in the present. I’m wearing my LA hat to symbolize something that I want to acquire in the future. And investing is something that’s going to help me get to where I want to be, which is to be a property owner in the LA area. And I want to buy property, but also rent it out. I’m not going to just like let it sit there.

I’m going to rent that ish out and continue traveling the world. But community in person is also something that’s important to me. And I love the community I have. Whenever I go to LA there’s awesome Latinx money coaches there too, who I love who are guest posting on my blog. So yeah, community is the word for 2023.

Omg, last year’s was possibilities, but this year is community. So yeah, join my masterclass. Can’t wait to see you there. We’ll be doing a live q and a. It’s gonna be poppin. That’s going to be January 15th, and I will leave the link to sign up in the show notes. All right, everybody. Happy New Year.