WHAT IS ROTH IRA? HOW IT HELPS YOU IN LONG-TERM INVESTMENT?

jupitadas625 

I hope you are now much more familiar with investment than before through my earilier posts. I have already mentioned that only investing can make you rich, not your savings. It is very important to make your money work for you. You can do this from very early age by long-term investing. But again you would need a better plan to grow your money without worrying about it. In this post I am going to tell you about Roth IRA which is one of the best deal for long-term investing.

A Roth IRA is a type of retirement account like 401(k) with significant tax advantages. It is not employer sponsored, you contribute money on your own. It allows the investor to enjoy tax free returns and maturity amount for retirement. Roth IRA lets you invest in whatever you want. It uses after-tax dollars so that it can give the best deal for you. In Roth you invest your already taxed-income. Therefore you don’t have to pay any tax when you withdraw it. For example-if you invest $X and after thirty year it grows upto $(X+Y), the amount Y you earned in the Roth IRA would have been tax-free. Which means you pay taxes on the amount you contribute. You don’t need to pay taxes on the earning, which people like the most. Again you can decide when,if or how you would withdraw the money. There is no age restrictions to contribute in Roth IRA. You can contribute at any age as long as you have qualifying earned income which is another good thing about it. Where with 401(k), you are penalized if you withdraw your earning before 59½. Roth IRA allows you to withdraw your principal amount penalty-free. There are also exceptions for down payment on a home, funding education for you or your partner/children/grandchildren, and some other emergency reasons.

You qualify for these exceptions only when you open your Roth IRA for five years or more than that. I think these reasons are enough for you to open your Roth IRA. Another important thing about Roth IRA is that there are restrictions on how much you can contribute each year to a Roth IRA. The contribution limit for 2023 is $6,500 and $7,500 if you are age 50 or above. Again the Roth IRA income limit for 2023 are less than $153,000 for single tax filers, and less than $228,000 for those married and filing jointly. These limits change each year.

Many people may ask now,” we don’t know how to open a Roth IRA, how would we invest”. Nothing to worry about it. After all of these i will also tell you how to open a Roth IRA.

To start a Roth IRA, you have to first open an investment brokerage account with trusted investment company. This account will probably hold only your Roth IRA for now, you can expand it to host other accounts as your need s changes. Now you know almost everything about Roth IRA, so open an account and invest as early as you can and grow your money.

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2 thoughts on “WHAT IS ROTH IRA? HOW IT HELPS YOU IN LONG-TERM INVESTMENT?

  1. www.sekret-natury.pl

    Insightful piece

  2. Poznaj więcej

    Excellent write-up

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