A Roth IRA (Individual Retirement Account) is a great option for individuals who want to pay taxes now and potentially not have to pay taxes later. For individuals who might expect income (and tax rate) to increase over time, contributing now means they will pay a lower tax rate upfront and no taxes on qualified withdrawals in retirement.
Roth IRAs offer certain tax advantages to individuals who are looking for a way to grow spendable income for retirement. For those seeking an easy way to gain a variety of investment options while building their retirement portfolio, a Roth IRA might be the ideal choice.
Building a portfolio with a Roth IRA can offer a range of benefits, while helping to secure your future retirement goals. Roth IRA benefits include:
If you expect your income (and tax rate) to increase over time, contributing now means you’ll pay a lower tax rate and pay no taxes on qualified withdrawals when you retire.
The sooner you start contributing, the longer your contributions will have to compound tax-deferred, and the more spendable income you may have in retirement.
You must have taxable compensation to be eligible to contribute.
You can generally withdraw your money, anytime, without taxes or penalties, if you are over age 59½ and have had the account five years or more. If you don't meet this requirement, withdrawals could incur taxes and/or penalties on earnings.
You don't have the worry about required minimum distributions (RMDs) since they're not required for the original owner. Qualified distributions from a Roth IRA do not raise your tax rate.
It starts with understanding the differences.
When deciding between a Traditional IRA and a Roth IRA, it's important to understand the different regulations and advantages of each account, considering factors like income limitations and the potential for tax benefits.
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