The Benefits of a Roth IRA
A lot of people don’t know the difference between a Roth IRA and a traditional IRA. A traditional IRA is funded with pre-tax dollars, which means that you don’t pay taxes on the money that you put into the account until you retire. A Roth IRA, on the other hand, is funded with post-tax dollars, which means that you pay taxes on the money that you put into the account now, but you don’t have to pay taxes on it when you retire. So, which one is better? Let’s take a look at the benefits of a Roth IRA.
One of the biggest benefits of a Roth IRA is that you don’t have to pay taxes on the money that you withdraw from the account when you retire. With a traditional IRA, you have to pay taxes on the money that you withdraw from the account when you retire. With a Roth IRA, you also don’t have to worry about mandatory minimum distributions (MMDs). With a traditional IRA, you have to start taking MMDs at age 70½.
Another benefit of a Roth IRA is that you can withdraw your contributions at any time without paying any penalties or taxes. With a traditional IRA, you can only withdraw your contributions if you pay a 10% early withdrawal penalty. You can also use a Roth IRA to save for retirement and pass it on to your heirs.
As you can see, there are some distinct benefits to having a Roth IRA. If you’re trying to decide between a Roth IRA and a traditional IRA, it’s important to consider your own unique circumstances. Talk to your financial advisor to see which one makes more sense for you.