1. What is a Roth IRA ?

Advantages of Investing in a Roth IRA

You can withdraw your funds from a Roth IRA tax-free at any time if you made your first Roth IRA contribution at least five years ago and are at least 59½ years old. You pay a penalty if you withdraw your money early. But you can take out funds without paying this penalty if:

  • You become disabled.
  • After your death, the distribution is made to a beneficiary of your estate.
  • You or someone in your family uses the money (up to $10,000) to buy a first home.

By allowing for tax-free withdrawals in retirement, a Roth IRA helps account holders diversify their tax base in retirement. Of course, tax rules and regulations change, and they could change in the future. But for now, any contributions made to a Roth IRA can be withdrawn tax-free.

Roth IRAs are also not subject to required minimum distributions. This is a huge benefit if you don’t need to withdraw funds from your IRA in retirement.

The SECURE Act passed at the end of 2019 provides advantages when a Roth IRA is passed on to a non-spousal heir. Your heir no longer needs to wait to withdraw the money, as was true prior to the passing of this new law. But the downside is that your heir must withdraw the full amount within ten years.

Leave a Reply

Your email address will not be published. Required fields are marked *