The Simple Path to Wealth

Your roadmap to a rich, free life — in just five minutes per week.

February 3, 2026

How do you build wealth simply and spend it wisely?

JL Collins will collab with Morgan Housel, author of The Art of Spending Money, to dig into both sides of the cash equation in a special live webinar on March 5.

You'll learn all about how to make sound decisions at every stage of your financial life.

Sign up for free here!

THE SIMPLE NUMBERS

"If you’ve been paying attention," JL Collins writes in The Simple Path to Wealth, "You might be thinking, 'Holy cow! This Roth IRA is looking like one very sweet deal' ... but as with many things in life, there is a catch."

As a quick refresher, a Roth IRA is an investment account that allows your money to grow tax-free. When you hit retirement, you can withdraw the proceeds tax-free. But with a Roth, you can only contribute after-tax money — dollars that you've already paid taxes on today.

This makes a Roth very appealing to young people and those with lower incomes (and the lower tax rates to match). If time is on your side, it's a great deal: Pay a low tax rate on your money now, and never pay taxes again as it grows and grows in your Roth. It's also a good deal if you believe you'll have a higher tax rate in retirement than you're paying right now.

But if you're a high earner, the opposite is true: Your tax rate is likely much higher now than it will be in retirement, so paying taxes on your money now is a disadvantage. You're better off contributing to your 401(k) — which you should be doing anyway, at least up to the employer match — because it allows you to throw in pre-tax income. When you withdraw the money from those accounts in retirement, you'll be paying a lower tax rate than you are now.

Elderly man reading newspaper in doorway — When will your taxes be lower: Now or then?

The question is: Where's the line? What income level or tax rate constitutes the event horizon or the out-of-bounds line, where once you go above it, you're better off leaving the Roth behind? It will vary by your personal situation, but by most estimates, it's the 22% or 24% federal income tax brackets. Once you go above that, you're probably better off contributing to a pre-tax account.

Of course, in 2026, the 24% bracket covers $105,700 to $201,775 in income for a single filer, and the income limit to make a Roth IRA contribution is $168,000. But these principles also apply to Roth 401(k)s, which have no income limits, and to Roth IRA conversions. (We'll cover those in a future newsletter!) There are also further considerations, like your state income tax rate, so you may want to consult a tax professional before making any decisions.

The rough math, though, is this: Once you get into that 24% bracket, the benefits of a Roth are beginning to fade.

SIMPLE PATH OF THE DAY

A slice of timeless wisdom from The Simple Path to Wealth:

"It can be very emotionally satisfying to fund a Roth, pay the taxes now, and be done with them. But it might not be the optimal financial strategy."

ASK JL

Q: I am recently retired and I have four different IRAs. (Two with Vanguard, two with Fidelity). Let’s call them Small, Medium, Large, and a Roth. When I withdraw my 4%, or whatever percentage I feel best, how should I take the money?

Assuming I leave the Roth alone, should I take a monthly 4% from each of the other three IRAs? Or take money from the Small until it’s depleted, then Medium, then Large? Or withdraw money monthly from all four? What is the best strategy here? —Gregory H.

Hi Gregory…

Congrats on your retirement! Well played.

First, you are correct that your Roth should be the last money you spend as it is the most valuable bucket. The only exception would be to withdraw from it strategically for tax purposes, as this money can be withdrawn tax free.

As for the small, medium, and large IRAs, it depends on what is in these buckets.

If each holds VTSAX, for example, I’d draw down the smallest followed by the medium just to simplify my holdings.

If they hold different investments, pull from the one you think weakest. For example, when I retired, I still had some individual stocks from my pre-indexing days. Those got sold off first.

—JL

Got a money question keeping you up at night? Reply to this email and we'll get it over to JL.

WHAT WE'RE READING

📚 Believe it or not, the National Library of Medicine has an in-depth study on "To Roth or Not to Roth" if you really want to nerd out. It's from 2015, so the exact numbers will be out of date, but one big takeaway is age: If you're under 40, Roths can be highly advantageous.

📚 At the end of January on A Wealth of Common Sense, Ben Carlson tracked "The Mid-Life (Spending) Crisis."

📚 Reader Bruno B. flagged that The Simple Path to Wealth was listed among "seven must-read books for mastering essential life skills" over at Big Think.

THE BIG QUESTION

Do you have a Roth IRA? What percentage of your investments are in that bucket vs. your 401(k), a taxable brokerage account, or elsewhere?

Reply to this email and we'll feature some of your responses in upcoming issues!

Last time, we asked why you hired a financial advisor and — if you got rid of them — why you decided you didn't need one anymore. Here are a few of your answers...

I originally hired a financial advisor because I felt I didn't have the time or attention span to deal with asset allocations, etc. Got rid of him when I realized the drag and friction caused by the AUM model, particularly when it occurred to me that I was initiating all contact with them (annualized updates, etc.). It wasn't personal, it was business. Made the switch and haven't looked back. —Doug H.

My entire life I have had an account with Edward Jones. As the years went on, I found myself wanting to know more about investing. I was reading your book and came across the section on financial advisors' fees. Thats when I started to dig deep to see exactly what I was losing. When I realized it was thousands of dollars, I couldn’t ignore that. Thanks to your book, I gained the confidence to cut the cord and self manage my retirement accounts through Fidelity! —Natalie B.

We hired a financial advisor based on a neighbor's recommendation. If I remember correctly, he said something like, "All the physicians at the hospital are with this guy." We had annual meetings with (early) retirement forecasts, but I never really understood how the fees worked, how much we were paying, or why we were invested in so many different funds. We were strong saversm and when we moved jobs, we would roll the old 401(k) into an IRA with the advisor. We eventually added an after-tax brokerage, a Roth, and we had our 529s with him as well.

Fast forward 15 years. My husband had already retired and I was within 2 years of my planned early retirement date when I was unexpectedly laid off. I guess layoffs are pretty much always unexpected. I took a look at the family budget to see what could be cut so I could avoid starting over with another big corporation for less than two years. I realized that the fees to the advisor (1% AUM) were our largest expense in our budget. We had already paid off the mortgage, but this expense was more than groceries, travel, auto expense, etc. —Debbie E.

low angle photo of city high rise buildings during daytime — They work in fancy glass towers — but do you need them?

This year, I decided to end my relationship with my financial advisor, who has been managing a few retirement accounts and one brokerage account on my behalf. The reason was simple: the returns on the funds I personally manage have consistently outperformed the funds managed by my advisor—significantly. Also, my financial advisor takes a percentage of my earnings. While it’s minimal, over time that percentage adds up. And I’m at a place where I want that money working for me, not going toward management fees I no longer need.

I’ve been with this advisor for 10 years, and I’m deeply grateful for the guidance they gave me early on. When we first started working together, I knew nothing about retirement accounts or 401(k)s. They were the first person to explain that I needed to contribute enough to my 401(k) to get my employer match—because it’s free money. I had no idea how that worked, and that advice alone earned me thousands of dollars.

They also gave me wise perspective on debt. They explained that some people are so focused on paying off debt that they never build an emergency fund. Then, when an emergency inevitably happens, they end up right back in debt. Instead, they encouraged me to pay down debt while also building savings. That advice also saved me thousands of dollars.

While I’ve outgrown the help this advisor can offer me, I still felt a pang of sadness in saying goodbye. I can honor the support they gave me and honor my own growth. Sometimes it's time to say, “Thank you. I’ve got it from here.” —Katherine S.

JL, Great book. I’ve been a financial advisor for 30 years and I couldn't agree more with your Plan. Thanks for the clarity. I’ve sent your book to many clients.
—Jim B.

I hired a financial advisor because I wanted support. I have plenty of experience saving, investing (thanks J.L.!), paying bills, being frugal, etc., but losing a partner and planning lifetime, all-the-marbles, no do-overs retirement? Those are different, and it feels well worth having affordable, professional “training wheels” until I’m sure I have my balance. —M.

I hired a financial advisor when my second child started school. I was dealing with a $10K+ debt and with the end of daycare payments, a $700 per month swing to the positive of our expenses. I wanted to be sure I had my financial priorities straight to get on the right track with debt reduction and saving for the future. She charged a flat monthly fee, which I was happy to pay because her advice led me to get out of debt and start saving. I stayed with her through my divorce (she helped me to find life insurance with a long-term care rider so my children wouldn't be saddled with that issue), a career change (temporary drop in income while I was back in school and establishing myself in the new field) and the investment of the proceeds from my home when I remarried.

It wasn't until I got hold of The Simple Path to Wealth (Shout Out to the guys over at ChooseFI!) and I learned about how fees cut into savings. That night, I went home and downloaded my statements. I discovered I was paying upwards of $300 per month in one account in management fees. (I had four accounts.) It didn't "hurt" because I didn't see it. My balances were growing, and that's all I had been looking at. —Rhonda F.