For many, the Roth IRA is the best thing since sliced bread. And there’s one perk that always steals the spotlight: tax-free income during retirement. With a Roth IRA, you pay taxes upfront, and after you turn 59 1/2 and meet the five-year rule, all the money in your account is tax-free.

Sounds pretty great, right? Even if your account grows to over $1 million, you won’t have to share a dime with Uncle Sam. Of course, there are some trade-offs, like not getting a tax break now. But if becoming a Roth IRA millionaire has ever crossed your mind, here are five secrets you should know.

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1. They don’t just wing it

It’s easy to say you want to retire a Roth IRA millionaire, but setting specific goals and sticking to them? That’s where the magic happens.

Whether it’s deciding how much to sock away each year or aiming for a target balance by a certain age, having clear goals keeps you focused and helps you make smarter money moves. Plus, when you know the number you’re aiming for, you can work backwards to figure out exactly what you need to do today to hit that goal.

2. They get a head start

One of the perks of a Roth IRA is that anyone with earned income can contribute — even your kid. If your child has a part-time job, you can open a custodial Roth IRA and both of you can pitch in up to the annual contribution limit. Keep in mind that the total contributions can’t exceed your child’s earned income. But don’t worry — time can still work in their favor to make it easier for them to build a million-dollar Roth IRA.

Let’s say your 15-year-old contributes $7,000 every year for 40 years. That’s $280,000 socked away, but here’s when it gets exciting. By investing and earning an average 8% return, that Roth IRA could grow to over $1.9 million before they hit retirement age.

3. They know how to manage their income

You don’t need to pull in a massive paycheck to become a Roth IRA millionaire. In fact, if you’re making too much, you won’t be allowed to make direct contributions to a Roth IRA. It’s important to keep an eye on the annual income limits each year to make sure you still qualify — or consider using a Backdoor Roth IRA if you don’t.

All told, contributing to your Roth IRA isn’t just about how much you make. What’s even more important is how much you’re able to set aside to save and invest. The good news? You could save a bigger chunk of your paycheck by making a few moves, including:

• Develop a budget
• Avoid lifestyle creep
• Pay off credit card debt
• Build a solid emergency fund

4. They understand the power of compounding

Saving $7,000 a year for 10 years would give you $70,000. Not too shabby, but we can definitely do better. If you invest that $7,000 annually and earn a 12% return, you could almost double your money. That’s the magic of compounding in action. It’s when the money your investments make starts earning even more money.

Let’s take a look at how your savings could grow every 10 years if you contribute $7,000 annually and earn a 10% or 12% return. Keep in mind that investment returns aren’t guaranteed, but patience and sticking to high-qualify investments can pay off in the long run.

Data source: Author calculations.

5. They don’t get bored doing the same thing over and over

The path to becoming a Roth IRA millionaire can seem pretty uneventful. Every year, you contribute as much as possible up to the annual limit. In 2024, that means tucking away up to $7,000 if you’re under 50, and $8,000 if you’re older. Then you invest the money.

Sure, you’ll need to figure out how to maximize those contributions and make smart investment choices, but beyond that, it’s all about consistency. Boring? Maybe. However, it’s still pretty exciting to know that by starting now, you’re laying the foundation for a comfortable life in retirement.

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