What are the advantages of a Roth IRA?
-Because you contribute money after the government has already taxed it, withdrawls of contributions are tax free. Even better, the earnings grow tax free. In other words, if taxes are higher in the future, your Roth IRA doesn’t care. At retirement you still get to withdraw your money without paying higher taxes on it. -It is very flexible in how it can be managed. In other words, you can have a big mix of investments in it. -Because you have already paid income tax on it, you can pull out your contributions (not your earnings) at any time. This is a huge advantage over the 401(k). -Most people will be in higher tax brackets as they get older, meaning that you will pay less on your contributions now than you will when you retire. What are some disadvantages? -You still have to be 59.5 to withdraw earnings without heavy penalties. -It is not tax deductible -There is always the risk that congress will decide to tax earnings on Roth IRAs between now and your retirement. What is this about
