Saving for retirement is one of those things many of us put off at times when we should be investing our hard earned money.  However a lot of times the question comes as to which type of retirement account we should put our money in.

First off, a Roth IRA allows you to pay your taxes upfront when you’re saving for retirement.  No other retirement account such as a traditional IRA, 401k, or a 403b allow this.  The other reason paying taxes on your retirement up front is better is because your taxes will usually be lower when you’re contributing to your Roth IRA.

For example, when you’re younger you’ll likely contribute to your job’s 401k program, you’ll likely have a few kids, and you’ll also own a home in most cases.  All of these things lower your taxes in one way or another, but when your retired, you won’t have these options anymore thus increasing your taxes owed.

Second, any growth you earn on your investments will grow tax free.  Meaning as your investment grows in value you won’t have to pay a single dime in taxes for it because you’ve already paid it up front.  So no matter if you earn 5% on a good save investment or 20% on a riskier investment you still won’t have to pay any taxes on them.

Third and lastly, the best part about a Roth IRA is that it allows you take withdrawals from your account tax free when you reach the age of 59 and a half.  This means that all the growth you’ve obtained, and money that you’ve contributed will not be taxed, unlike an IRA when you retire every single cent will be taxed.

In the end these are great benefits but remember that you also need to meet the Roth IRA qualification guidelines as well.  This means you cannot put more than $5000 a year into the account and that you cannot earn more than $167,000 on your tax returns. So get started today while you’re still young.

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