Top 5 Benefits of a Roth IRA Top 5 benefits of a ROTH IRA are so important to understand. A ROTH IRA is by far one of the most powerful investment vehicles you can use to build wealth. A ROTH IRA is a type of retirement account but differs from a traditional IRA and 401k in the way that it is taxed. With a ROTH IRA you are funding your account with after tax dollars, like the money from your pay check that you have already paid taxes on. This enables you to get tax free income in retirement. For example, let’s say you fully funded your ROTH IRA every year for 40 years you would have $220,000. Now let’s say that money was invested and grew to $800,000 when you go to retire you would withdraw the entire $800,000 without owing any taxes on it. In contrary to a 401k if you funded for the same amount of $220,000 and it grew to $800,000 you would owe taxes on that $800,000 at about 15% (if not higher in the next 40 years) paying $120,000 to the government in taxes. Do you see now why a ROTH IRA is such a powerful investment vehicle? A ROTH IRA is definitely one of the 1st type of investment accounts you should open up. Not to mention, unlike a 401k where there is a tax penalty for early withdrawals, in a ROTH IRA you can withdraw any contribution you make tax free; you just can’t touch the gains. A ROTH IRA can be used as an emergency fund for this reason. Now because the ROTH IRA is such a powerful investment vehicle the government has enacted yearly contribution limits, to keep rich people from abusing it. If you’re under 50 years old you can put up to $5,500/year in your ROTH IRA, and if you are over 50, you can put up to $6,500/year in your ROTH IRA. There are also tax advantages to funding a ROTH IRA. Any amount you contribute throughout the year can be written off on your taxes! The federal government likes to reward people who fund their own retirement. Because there is no taxes paid out on distributions of a ROTH IRA. You can also leave your ROTH IRA balance to your children by making them a beneficiary on your account or through a will or trust! This makes a ROTH a powerful tool for legacy building and wealth creation. Lastly, because the ROTH IRA is a type of retirement account you do have some type of protection in bankruptcy proceedings. So what this means is if in the future you had to file bankruptcy you had to file bankruptcy your creditors could come after everything you own but they could not touch the money in your ROTH IRA because it is a sacred account. There are a host of other benefits of having a ROTH IRA such as no minimum balance, and the fact that it acts as a money market account, which means it pays you a higher interest rate than your typical savings account. In summary, there are many benefits to having a ROTH IRA: 1) A ROTH IRA is funded with after tax dollars allowing you to get tax free income in retirement 2) ROTH IRA contributions can be withdrawn at any time for any reason, allowing your ROTH IRA to serve as a savings account or emergency fund. 3) There are tax advantages to funding a ROTH IRA that will allow you to lower your taxable expenses. 4) ROTH IRA balances can be passed down to your children, making it a powerful tool for legacy wealth building. 5) There is some protection in bankruptcy proceedings that make your ROTH IRA a sacred account and untouchable to creditors. What are your thoughts about a ROTH IRA? Do you have one? Are you thinking about opening one up? Tell me in the comments below! To find out why you should start investing with a ROTH IRA, check out this video https://www.youtube.com/watch?v=id-IEVX11V0 To find out what to invest in; in your ROTH IRA, check out this video https://www.youtube.com/watch?v=9JU3-8KA80g&t=294s If you found this video helpful make sure to LIKE, SHARE, and SUBSCRIBE to The Money Mike Show for helpful personal finance videos!!! Add my social media platforms to stay current on the latest Money Mike Show videos…. https://www.youtube.com/TheMoneyMikeShowOfficial https://www.facebook.com/themoneymikeshow/ https://plus.google.com/u/0/+TheMoneyMikeShowOfficial Additional sources on ROTH IRAs: http://money.usnews.com/money/retirement/articles/2010/10/06/10-reasons-to-open-a-roth-ira https://www.fidelity.com/viewpoints/retirement/nine-reasons-roth http://www.investopedia.com/financial-edge/1211/how-does-bankruptcy-affect-your-ira.aspx
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