Are you planning for your future? It’s important that you set money aside for retirement and any unexpected emergencies, but what’s the best way to do it? How do you set up the right account that will offer you the best savings options and interest?
Roth IRAs are great options for storing and saving your money for a retirement fund. All of this accounting mumbo-jumbo can be confusing for the average person, though. What is a Roth IRA anyway?
Let’s talk about it. Keep reading for our brief guide on a Roth IRA account.
What Are Roth IRAs?
Roth IRAs differ from traditional IRAs (but not by much). When you put money into a Roth IRA, you’re contributing after-tax dollars, so you don’t have to pay tax when you make withdrawals.
There are no penalties or taxes after you’ve had the IRA for 5 years and you’ve reached the age limit (59 and 1/2 years), and there is no mandatory distribution. Contributions are not tax-deductible.
When you add money into a Roth IRA, you’re using it to invest in assets like stocks and bonds. You can only contribute a certain amount of money per year, but that money will grow.
When you have a traditional savings account, you’ll accrue interest. That interest is small, however, and it doesn’t often outperform inflation. When your account doesn’t keep up with inflation, you’re actually losing money over time.
A Roth IRA comes with risks, but if you start early enough, it’s unlikely that you’ll lose money. You’ll invest in a safe and steady way to continue growing your wealth.
Who Should Start a Roth IRA?
Many people think they shouldn’t start putting money away for retirement until they’re already in their fifties, but is this true?
In reality, there’s never a wrong time to start your retirement savings account. Not only will you be supporting your future self, but you can also use this money for other ventures (with a penalty if the account isn’t old enough).
To contribute to a Roth IRA, your income has to be below a certain level. It’s helpful to talk to an accountant about this to make sure that you qualify. You should anticipate that you’ll be in a higher tax bracket when you’re finally able to withdraw from your account.
There is no age restriction for Roth IRAs, so even young people can start investing and saving their money. Consider how much money you’ll have in the future if you save even a few thousand dollars per year. Starting in your twenties or thirties is a great idea, but you’re also never too old to start a Roth IRA.
Learn more about contributing money to a Roth IRA today.
Is a Roth IRA Right for You?
Roth IRAs are great for anyone who wants to save money for their future. There’s no reason not to start planning now while you still have a reliable income.
Protect your future self by contributing to a Roth IRA as soon as possible.
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