If you’re looking for a sound long-term investment, then you’ve come to the right place. Below, I’ve listed a number of key points as to why a Roth IRA might be for you.
Earnings are Completely Tax Free
A Roth IRA offers something that no other other retirement plan offers, the ability to withdraw your earnings free of taxation. That means, when you finally decide to cash out on your retirement plan, you will get back every penny of your investment plus the earnings you have accrued completely tax-free.
Better Than Your Run of the Mill IRA
Currently, a Roth IRA allows a maximum contribution of $4,000 annually with the cap being raised to $5,000 in 2008 to account for inflation. The only drawback is that, unlike the traditional IRA, you don’t get a tax deduction for your contributions. But, in all honesty, a Roth IRA tends to be the better choice for most investors as long as your willing to maximize your contributions. It gives greater tax leverage to your retirement savings as long as your willing to stick with it.
Flexibility is Paramount
The advantage of having a Roth IRA is in its flexibility. Your investment can be utilized in a number of different ways. The IRS allows for a one-time $10,000 withdrawl from your Roth IRA towards the purchase of your first home. Your contribution can also be applied towards the payment of educational expenses. And if you’re really in a pinch, you can withdraw up to your maximum contribution at anytime without having to pay it back like a 401(k). Note that if you choose to withdraw any of your earnings towards the latter two options, there will be minor penalties.
Minimum Distribution Rules Don’t Apply
Let’s say you’re old and retired, but have other sources of income. There are no restrictions as to when you have to cash out your Roth IRA. That means, if you’ve already got it made, all you have to do is just sit back and watch with a smug look on you face as your tax-free investment continues to grow.