“The question isn’t at what age I want to retire, it’s at what income.” George Foreman
Saving for retirement may not be a popular topic, but it is something that needs to be discussed. The idea is to invest now so that you may live comfortably during retirement. Starting your retirement savings at an early age can lead to early retirement. Many people have become millionaires through various retirement accounts by consistently saving at a higher rate.
What Is a Roth IRA?
A Roth IRA is an individual retirement account that you invest with “after-tax” income. After–tax income is the net income after the deduction of all federal, state, and withholding taxes. So the money you contribute, will accumulate and grow tax-free. In addition, the funds can be withdrawn tax-free at retirement.
NerdWallet describes the Roth IRA as a “tax-advantaged individual retirement account. Your contributions are made after tax, which means there’s no initial tax benefit. But that money and your investment earnings grow tax-free, meaning there’s no income tax on Roth IRA withdrawals in retirement.”
Benefits of Roth IRA
- Tax-free income
- Flexible. Unlike many other retirement accounts, you can use your money when you need it. Funds can be used to purchase your first home (up to $10,000) or college expenses. Additionally, the account can be used for emergency cash.
- Leave money for heirs. Roth IRA allows you to leave tax- free money to beneficiaries of your choice.
Contribution limits
According to RothIRA.com, you can contribute up to $6,000 a year to your IRA if you are under 50 (over 50 can contribute up to $7,000 a year). You can start taking tax-free withdrawals from the account once you reach the age 59 ½. Unlike other retirement accounts, you can make contributions to your Roth IRA as long as you’d like.
Wrap Up
Even though a Roth IRA is not anything new, yet many people do not maximize it for all its benefits. Choose to invest early so that you can enjoy the rewards sooner than later.
Action
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