Chances are you’d like to retire at some point in your life. To do this, it’s best to have different financial investments available to you. While stocks, mutual funds, gold and other investments are available to you, you might also want to consider opening up a Roth account as well. A Roth IRA is a specific retirement account that allows you to grow your money, all tax free. This is because the money you place into the account is after-tax dollars, which means you have already paid your taxes on the money you are putting into the account, so you don’t need to pay on the money inside of the account. This makes a Roth IRA an extremely appealing and valuable account and something you should become more familiar with, if retirement is on the brain.
Many individuals confuse a regular IRA with a Roth IRA. Both are designed for retirement accounts, but the Roth IRA has a few significant differences to the traditional IRA. For starters, the Roth IRA does give you more flexibility with your investment. You are able to withdraw money from your Roth IRA at any time, all without a penalty. This is not the case with a traditional IRA, as there is a penalty attached to early withdrawal. Keep in mind that with a traditional IRA you are not able to withdraw investment earnings before you turn 59 and a half without penalty. This penalty won’t matter much if you don’t plan to retire until 65 or so; however, this can be a drawback if you’re set to retire early.
Another way your Roth IRA is different from a regular IRA account is how money is mandated. A Roth IRA allows you to leave the money alone in the account for as long as you desire. With a regular IRA, you must start withdrawing money after you reach 70 and a half, regardless of if you need the money or not. Also, with a Roth IRA, you can continue to contribute to the account for as long as you want. Once you reach 70 and a half, this option is no longer available to you with a regular IRA account.
From this point, most would wonder why anyone would choose a traditional IRA over a Roth IRA. The truth is, not everyone qualifies for a Roth IRA account or would benefit from one. Before you can open a Roth IRA account, you must meet certain financial requirements. Is a Roth IRA right for you and your retirement goals? Speak with one of our Foresight in Utah specialists today to discuss your options.