3 Reasons You Should Open a Roth IRA Today
A Roth IRA can be an extremely valuable retirement savings plan if used correctly. Here are three reasons you should open a Roth IRA today.
The Roth IRA is one of the more misunderstood and underappreciated types of retirement saving accounts around. However, there are many benefits to opening one that set it apart from not only other retirement plans but from other long term financial strategies as well. Here are three of the most impactful benefits.
A Roth IRA Is Tax-Free Income
That’s correct. A Roth IRA, believe it or not, is a legitimate source of passive income that is not even taxed. The catch of course is that it is not eligible to be tax-free until much later in life. This differs from a traditional IRA that is not taxed up front, but once pulled out of the account is now subject to typical income taxes. This provides an opportunity to enjoy this income entirely stress free at a later point in life knowing that none of it has to be set aside for taxes.
Traditional IRAs require that you begin taking out annual withdrawals once you turn 70 years old. This is not something that you need to worry about with Roth IRAs. Although you still can withdraw annually like you can with a traditional IRA, you do not have to. Traditional IRAs almost limit your contributions to the account at 70. Roth IRAs do not set this limit. You also have quite a bit of freedom with Roth IRAs in terms of when you pull your money out. You can do so at pretty much any time, with the only caveat being that it is not eligible to be tax-free until 59 years old.
for Young People
Typically speaking, younger people are not yet in their peak tax bracket yet. This makes a Roth IRA an attractive way to get going on their retirements at an extremely young age, due to the fact you will be able to pay a lower cost on your overall tax bracket, and then enjoy the money completely tax free later in life. If you wait until later, there is a good chance you will be taxed harder upfront on a Roth IRA.