get rich slowly with a roth ira
Established by Congress in 1997, the Roth IRA is by far the greatest retirement saving vehicle for the majority of Americans (save those with very high incomes). That’s not to say Roth IRA’s should be used to the exclusion of 401k’s and taxable savings, but rather that it should form the core of your retirement investing strategy due to its superior tax characteristics.Why Roth IRA’s Are BetterUnlike Traditional IRA’s and the more popular company 401k plan, Roth contributions are not tax-deductible. In exchange for paying taxes today, the IRS will let you withdraw from your Roth after age 59 1/2 completely tax-free. That’s right, you’ll never have to pay taxes on that money ever again. But wait, there’s more! Since Roth contributions are after-tax, you can withdraw contributions penalty-free at any time. For example, say you’ve contributed $20,000 to your Roth and thanks to a prolonged market rally your account is now worth $35,000. Wanting to take advantage of depressed real estate prices, you opt to take $15,000 out of your Roth for a downpayment. This is perfectly legal and there are no taxes or penalties to pay, so long as you withdraw less than the sum of your contributions (in this case, $20,000). With a 401k or Traditional IRA, you would either need to take the money out as a loan (thus paying interest) or tax an early distribution, which would be hit by both income tax and a 10% early-distribution penalty. Thus, a Roth can be used as a sort of last-ditch emergency fund if need be. Visit AmateurAssetAllocator.com for more on Roth IRA rules, where to find the best Roth IRA rates, and other personal finance and investing topics.
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