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I love my Roth IRA. This video is about all the reason you should be using a Roth IRA to save more money for retirement.
Roth IRA’s are funded using after-tax dollars meaning you do
not get a tax deduction when you make the contribution.
Instead, you get the benefit of completely tax-free withdrawals
in retirement. There are some rules that are specific to the Roth
that need to be followed for the withdrawals to be tax-free.
A Roth IRA can be a great option if you have taxable earned
income, you are in a low tax bracket and you are under the
income limitations. You can open a Roth IRA at all the same
institutions as the traditional.
A big difference with a Roth is that you can withdraw your contributions at any time without taxes or penalties. This is a very nice feature. For example, if you have contributed $20,000 over the last 4 years and the account value has grown to $30,000 you would be able to withdraw your $20,000 of contributions without owing any taxes or penalties. I like the flexibility this offers because sometimes life gets in the way of our master plan. It is nice to be able to tap these funds if your circumstances change. The flip side is that it makes it easy to dip into retirement money which may not be the greatest idea. It is always good to talk to an expert that you trust to give you unbiased advice before making any big decisions.
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Go open your Roth IRA today!!
To Becoming Great with Money,
Rich McCormack, CFP®
School of Personal Finance
