Author Topic: 0 to millionaire 5 years. What am I missing?  (Read 7411 times)

Mgmny

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0 to millionaire 5 years. What am I missing?
« on: February 22, 2017, 04:52:52 PM »
http://www.cnbc.com/2017/02/22/31-year-old-millionaire-shares-his-no-1-money-saving-tip.html

So, this guy Grant says he went from 0 to 1 million in 5 years. His accounts show like $940k in an unnamed account, and $60k in a Roth IRA.

1. He must have made killer investment choices to get a Roth balance to $60k in 5 years.

2. With $960k+ in income in 5 years, how did he even fund a Roth?

What am I missing?

Mgmny

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #1 on: February 22, 2017, 04:57:09 PM »
Sorry for the double post, but it says he only saved 50% of his income, so he really earned $2 million in 5 years. How I'm the world could he have $60k in a Roth?!?!

dividendman

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #2 on: February 22, 2017, 05:00:46 PM »
You can see his Trad IRA is zero, he probably used the backdoor Roth (making an after tax contribution to a Trad IRA then converting it to Roth).

I do this every year as my income is too much for trad IRA deductions or Roth contributions.

You can look up backdoor Roth to see how it's legal etc.

Mgmny

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #3 on: February 22, 2017, 05:07:56 PM »
Even with backdoor Roth, he's subject to the $5500 per year max

dividendman

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #4 on: February 22, 2017, 05:34:24 PM »
Yeah, he probably had some in there from before.

His "before" picture only shows his checking account of ~$2, not any investment accounts he may have had.

If someone looked only at my checking account they'd probably think I was broke, too.

dogboyslim

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #5 on: February 22, 2017, 05:37:23 PM »
roth 401k rollover?  17-18k per year for 5 years, then quit then rollover to roth IRA would give him more than 60k.

LAGuy

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #6 on: February 22, 2017, 05:39:15 PM »
In a 5 year time span, it's possible to contribute up to 7 times. That gets you to nearly 40k.

Example: in April 2011, contribute for tax years 2010 and 2011. In January 2016, (less than 5 years later) make your 7th contribution. With investment returns you could be easily be pretty close to 60k over that time frame I figure. Maybe he picked a nice winning stock too.

Roland of Gilead

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #7 on: February 22, 2017, 05:43:00 PM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

dogboyslim

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #8 on: February 22, 2017, 05:46:42 PM »
Doesn't that only work if you are allowed AT contributions above the contribution limit (18k) and in-service distributions?  I didn't think those things were common.

Mgmny

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #9 on: February 22, 2017, 05:55:49 PM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

I'm a noob, but I thought you couldn't roll over from 401(k) until you leave your employer?

Mgmny

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #10 on: February 22, 2017, 05:59:38 PM »
roth 401k rollover?  17-18k per year for 5 years, then quit then rollover to roth IRA would give him more than 60k.

I always forget 401(k) Roths exist. This could be what happened.

boarder42

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #11 on: February 22, 2017, 06:04:40 PM »
There is also the mega back door roth

aschmidt2930

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #12 on: February 22, 2017, 06:11:52 PM »
Sorry for the double post, but it says he only saved 50% of his income, so he really earned $2 million in 5 years. How I'm the world could he have $60k in a Roth?!?!

My guess from scanning his site is that a lot of that income came from affiliate marketing programs.

If he's building websites, there are dozens of complimentary products that have affiliate programs that pay 20%-30%.

Marketing is the best skillset to get rich with in today's world and it's not even close IMO.

Monkey Uncle

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #13 on: February 23, 2017, 04:33:16 AM »
He made $2 MM in 5 years and only ended up with $1MM after investment gains?  Nothing badass about that.  Sounds like a good candidate for a thread in the hall of shame.

Mgmny

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #14 on: February 23, 2017, 04:49:54 AM »
He made $2 MM in 5 years and only ended up with $1MM after investment gains?  Nothing badass about that.  Sounds like a good candidate for a thread in the hall of shame.

I agree 100%. That's why I said he ONLY saved 50%. Honestly, i have no idea how someone blows through 1 million in 5 years.

Even if he lived like the median family, he could have retired on his net worth forever!!

TheAnonOne

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #15 on: February 23, 2017, 07:58:51 AM »
Depending on what you count as 0. He clearly didn't start at 0 everything!

Using his definition, we will do just about the 0 to 1m in 5 to 6 years. We already had a house with a low payment, debt free, large income with the ability to save 100k a year.

100k a year is obviously, 500k but with 5 years of returns, or likely since 08, massive returns... pretty doable.


__________
Now, you COULD measure it from the day you turn 18, which levels the fields a bit against doctors or someone who did trades out of high school. The trades guy probably hits FI earlier!

Shor

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #16 on: February 23, 2017, 09:25:53 AM »
Selling something? Check.
High income, High spending? Yup
Nothing to learn here.

tooqk4u22

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #17 on: February 23, 2017, 10:16:38 AM »
Sorry for the double post, but it says he only saved 50% of his income, so he really earned $2 million in 5 years. How I'm the world could he have $60k in a Roth?!?!

My guess from scanning his site is that a lot of that income came from affiliate marketing programs.

If he's building websites, there are dozens of complimentary products that have affiliate programs that pay 20%-30%.

Marketing is the best skillset to get rich with in today's world and it's not even close IMO.

Agreed, I scanned it as well and there are no specifics.  There was one post about buying a house 4 years ago with only 5% down and it is now up $350k in value - so there is a big chunk of the $1mil also said he made $100k in Amazon over the years. The rest who knows, but I suspect the $1mil includes values of his blog and business and other sites he might own and the liquid/investable net worth is far less than depicted. 

Nice for marketing and driving blog traffic.

Must Stache

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #18 on: February 23, 2017, 11:18:50 AM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

Can you please explain a little more about why and how you do this?  I currently contribute the full $18K max after-tax to my 401(k).  What is the reason for then rolling it into a separate Roth account?  Sorry if there is an obvious answer.  I'm fairly new here :-)

Aggie1999

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #19 on: February 23, 2017, 11:27:44 AM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

Can you please explain a little more about why and how you do this?  I currently contribute the full $18K max after-tax to my 401(k).  What is the reason for then rolling it into a separate Roth account?  Sorry if there is an obvious answer.  I'm fairly new here :-)

If you roll the after-tax contributions into a Roth account then any growth on those funds grows tax free. If you leave the after-tax contributions in the 401k then the growth is taxable upon withdraw. To accomplish what the poster is describing, your 401k plan needs to allow after-tax contributions and in-service withdraws (i.e. withdraws while still working). Even if your 401k plan only allows the after-tax contribution part it's still a nice option for those planning do do something like a tIRA to rIRA conversion ladder or those in a lower tax bracket at retirement than while working.

bacchi

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #20 on: February 23, 2017, 12:12:27 PM »
Selling something? Check.
High income, High spending? Yup
Nothing to learn here.

Yep. You nailed it.



RangerOne

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #21 on: February 23, 2017, 03:01:56 PM »
Just for fun's sake, you could have had $60k in a roth in about 6 years if you started investing in 2009 and were invested 100% in the US total stock market. There were 5 amazing years in that run with one dud.

Must Stache

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #22 on: February 23, 2017, 03:26:46 PM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

Can you please explain a little more about why and how you do this?  I currently contribute the full $18K max after-tax to my 401(k).  What is the reason for then rolling it into a separate Roth account?  Sorry if there is an obvious answer.  I'm fairly new here :-)

If you roll the after-tax contributions into a Roth account then any growth on those funds grows tax free. If you leave the after-tax contributions in the 401k then the growth is taxable upon withdraw. To accomplish what the poster is describing, your 401k plan needs to allow after-tax contributions and in-service withdraws (i.e. withdraws while still working). Even if your 401k plan only allows the after-tax contribution part it's still a nice option for those planning do do something like a tIRA to rIRA conversion ladder or those in a lower tax bracket at retirement than while working.

Thanks for the response.  I didn't realize that after-tax contributions to a Roth account are treated differently than after-tax contributions in a 401k.  In fact, my 401k even labels my after-tax contributions "Roth contributions" (I had contributed pre-tax dollars for a few years, so they show up separately on my statement).  I thought the whole benefit of contributing after-tax dollars was that I won't have to pay tax on the growth upon withdrawal, but it sounds like you're saying that I do have to pay tax on the growth.  Is that correct? 

arebelspy

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #23 on: February 24, 2017, 04:34:49 AM »
Thread title made me think this would be about us, as it was almost the exact title the MadFientist used for our podcast interview.

We went 0 to 1MM+ in 5 years, so I'll chip in.

First, our $0 NW though consisted of us owning several underwater properties, offset by a bunch of cash (six figures) which was used to buy more real estate.  So zero, yes, but an almost artificial zero, primed to switch from hurting to helping.  When RE rebounded, the new properties shot up, as did the old ones, rapidly skyrocketing our net worth.

We also were getting returns of 15-20% during those 5 years, plus saving close to six figures each year (on base salaries of ~40k each--both public school teachers, but doing lots of side gigs to boost that).

We did have a few mortgages, but overall I'd put that as only about 10-20% of the explanation of how we did it.  Overall, not a ton of leverage used, but some--we always put down 25%, and our current LTV is 20%--as if we put down an 80% down payment on our properties today, many of which are paid off.

His path was obviously different--he made way more than we did, and saved much less as a percent.

But it's totally doable, even in a job like "public school teacher."

1) Earn extra from side gigs.
2) Invest the bulk of what you make (we were in the 75% range).
3) Add value where you can (for us it was using real estate knowledge to value add and get properties that were undervalued--valued appropriate to the market at the time, but valued under what they "should" be based on their potential return--thus producing outsized returns for us).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Metric Mouse

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #24 on: February 24, 2017, 10:11:27 PM »
roth 401k rollover?  17-18k per year for 5 years, then quit then rollover to roth IRA would give him more than 60k.
Yeah, not sure how this was missed. Pretty easy to do 60K this way.

TomTX

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #25 on: February 25, 2017, 04:07:35 PM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

I'm a noob, but I thought you couldn't roll over from 401(k) until you leave your employer?

If your employer allows it you can. No IRS rule against it.

Metric Mouse

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #26 on: February 25, 2017, 04:10:44 PM »
When we were making $260k a year we were putting in $25k or so each year in a Roth.   It is stupid easy when you know the loopholes.

Contribute after tax money into your 401k (we were limited to 20k after tax).   Immediately roll the money into a Roth account.  Done.

Does it make sense that the government allows this?  No.

I'm a noob, but I thought you couldn't roll over from 401(k) until you leave your employer?

If your employer allows it you can. No IRS rule against it.
Is this a difficult thing for employers to change? If one wanted to push it with their benefits department?

webguy

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #27 on: February 26, 2017, 10:13:10 PM »
This is uncannily similar to my own situation, same field, same steps, although I'm about 400k ahead of him at 31. Focusing on increasing your income is the way to go. Building a business is the quickest, most fun, and most fulfilling way to become wealthy IMO.

Metric Mouse

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #28 on: February 27, 2017, 12:28:11 AM »
This is uncannily similar to my own situation, same field, same steps, although I'm about 400k ahead of him at 31. Focusing on increasing your income is the way to go. Building a business is the quickest, most fun, and most fulfilling way to become wealthy IMO.
Nice!

Letj

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #29 on: February 27, 2017, 07:09:57 AM »
Even with backdoor Roth, he's subject to the $5500 per year max
Not really. If your 401k plan allows you to make after tax contributions, you can then move those contributions to your Roth in addition to your 5,500 contribution. I save 18% after tax which I move to my Roth from the 401k.

Roland of Gilead

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #30 on: February 27, 2017, 09:18:56 AM »
Even with backdoor Roth, he's subject to the $5500 per year max
Not really. If your 401k plan allows you to make after tax contributions, you can then move those contributions to your Roth in addition to your 5,500 contribution. I save 18% after tax which I move to my Roth from the 401k.

Yes, what ^ said.

Your plan has to allow in service withdrawals.  Our plan was with Fidelity through Microsoft.  The really bad thing is I had to research and dig around to discover this so we missed out on about $40k of Roth contributions during the years I was one of the uninformed.

It is a funny situation.   Roth IRAs are limited by income to give a retirement saving boost to those with moderate income, but when you make a shit ton of money, you can contribute 5x as much to a Roth.

You kind of see how the rich get richer?

Metric Mouse

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #31 on: March 01, 2017, 05:31:44 PM »
But wasn't most of his money made in his side job? Wouldn't this preclude moving that much money into his roth via in service distributions?
« Last Edit: March 02, 2017, 11:49:59 PM by Metric Mouse »

Paul der Krake

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #32 on: March 02, 2017, 01:09:53 AM »
You could do a Solo 401(k) with in service rollovers, right? You'd be limited at 25% of the profits, so you would need to net ~200k/year to max out the ~50k in a 401(k)

brian313313

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Re: 0 to millionaire 5 years. What am I missing?
« Reply #33 on: March 04, 2017, 10:35:36 AM »
You could do a Solo 401(k) with in service rollovers, right? You'd be limited at 25% of the profits, so you would need to net ~200k/year to max out the ~50k in a 401(k)

I have a Solo 401(k). I don't need to worry about maxing it out so I'm not sure what the current max is. You get the standard 401(k) contribution (24k for me cause I'm over 50) plus the 25% profit sharing up to the max. 25% of net is 20% of gross for me. So if I make 100k, I can pay myself 80k and then make a 20k profit sharing contribution. Then take the 24k out of the 80k for a 44k total contribution to 401k out of 100k earnings.

Sorry, but I'm not sure about the in-service rollover. The Solo 401(k) is a great option for me though.