What's the advantage of a Roth IRA, when it comes to funding your retirement comfortably? There are actually several Roth IRA advantages. Let's look at a few of them in greater detail.
One advantage of a Roth IRA is that all contributions and earnings made within the account may be withdrawn without being taxed, once a "seasoning" period has passed. Currently the seasoning period is five years.
The Roth IRA advantages are amplified by making good investment choices, with high earnings. Real estate investors, for example, use the tax-shelter to protect their most profitable transactions from capital gains and income taxes. If you are getting close to retirement age and your account balance is not where it needs to be, you may need to re-think your current investment choices.
One of the Roth IRA advantages is that you have easier access to your money. Once the seasoning period has passed, you can withdraw contributions at any time, without penalty. So it's more like a savings account, but you pay no taxes on interest or dividends as you would with a regular savings account.
Assuming that you will be in the same tax bracket after you retire, your contributions are "worth" more, when made to a Roth-type, rather than a traditional account. For example, if you make the maximum contribution of $5,000 at a 25% tax bracket, your contribution is equivalent to a $6,667 contribution made to a traditional account.
If you could be saving more per year, but are limited by the maximum contributions, you might want to consider a self-directed Roth-401K. Self-directing is always a good option to fully take advantage of a Roth IRA, a 401K or any type of retirement account. You probably have more options than your custodial company has made you aware of.
But, back to the Roth-401K… with that type of account, you are allowed to contribute more per year. New laws have made it easier for self-employed, small business owners, and other individuals to use a 401K.
If you expect to continue working and don't want to touch your retirement savings, there are other Roth IRA advantages. In traditional accounts, distributions must begin by the time you reach the age of 70 ½. You are never required to take distributions from a Roth type account.
If you want to take full advantage of a Roth IRA, you should learn more about self directing and the real estate market. No matter your level of experience, there are ways to tap into the housing market, without wasting a lot of your time or money.
You might be thinking that now is not a good time to invest in housing, but that is not true. You simply have to learn about who is still buying.
Combining houses with the Roth IRA advantages can generate millions in tax-free wealth for your retirement. One man took advantage of a Roth IRA and turned $20,000 into a million in only three years.
You can do that and retire in comfort.