Advantages of Saving Through a Roth IRA

One of the most important responsibilities that all people share is properly planning and saving for retirement. Regardless of what age you are, it is very important that you try to maximize your retirement savings as this will provide you with far more money when you are retired and can no longer work. When looking for a way to save money, one great option would be to open a Roth IRA.

For people that are wondering what is an IRA account, or more specifically, what is a Roth IRA, there are many features of the retirement savings vehicle that separate it from other types of accounts. One of the main features of a Roth IRA is that the money that you deposit into a Roth IRA can be withdrawn at any time. One of the biggest disadvantages of a 401k and other IRA accounts is that you will face severe financial penalties and taxes if you take money out of the account prior to reaching retirement age. With a Roth IRA, if you ever need the money that you previously saved, you can withdraw it at any time. However, any money that you made investing or rolled over from another account cannot be withdrawn without paying taxes or fees.

Another benefit of taking advantage of a Roth IRA retirement plan is that when you withdraw money from the account at retirement, you will not be taxed. Unlike withdrawals from a 401k or traditional IRA, a withdrawal from a Roth IRA will not impact your adjusted gross income. This is beneficial for people that think they will be in a higher tax bracket when they retire. It is also beneficial because you are not risking that there will be wild swings in taxes prior to your retirement age.

Since there are such clear advantages to investing in a Roth IRA, many people that presently invest in a 401k could benefit by transferring their funds. You will have the opportunity at any time to rollover your 401k into a Roth IRA. While you will be taxed on the move, you will not be penalized if you make a full transfer. This could save you a lot of money in penalties when compared to withdrawing the funds outright from your 401k or other retirement savings account.