The Benefits Of A Roth IRA Account

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

What is the first type of savings plan that you think of when you hear the word "retirement?" If you're in the working world, we bet that a 401(k) is usually one of your first thoughts. After all, as a type of account that is often available to employees and highly recommended, 401(k)s are certainly a savings strategy that should not be ignored when given the opportunity to participate in one. 

But what about other means of saving? Have you ever given any thought to a Roth IRA? By definition, Roth IRAs are nondeductible IRA accounts that allow tax-free withdrawals when certain conditions are met (income and contribution limits apply). And aside from the fact that they permit withdrawals on a tax free basis, these accounts also offer tons of flexibility, easier access to money, and allow you to leave money behind without penalties. Now let's look at these benefits more in depth:

Flexibility: After reaching 70 1/2 years of age, retirees are required to withdraw from their 401(k) and traditional IRA accounts - and not without an income tax we might add. In fact, there are even penalties for not withdrawing as expected! However, when it comes to a Roth IRA, there is no annual withdrawal required, which ultimately allows retirees to withdraw at their discretion - not when others say they must.

Accessibility: Should a retiree need to withdraw money from a traditional IRA account before the age of 59 1/2, a 10% penalty for early withdrawal is applied to the transaction - and that's in addition to the income tax that is already being taken out. Though early Roth IRA withdrawals are also subjected to income tax and penalties as well, they are only applied to the part of the withdrawal that is taken from earnings (keep in mind, however, that the account must be at least five years old). That means greater accessibility to money with less penalties accrued for the account holder!

Usability: Where traditional IRAs require a person's successors to pay taxes on the money left to them during the withdrawal process, Roth IRAs often present the opportunity for tax-free withdrawals. Furthermore, since they do not necessitate that retirees must begin withdrawing as they get older, they allow individuals to leave money in their account for as long as they live. Therefore, if the retiree has money that they don't plan to use in their lifetime, they can keep it safe in their Roth IRA account for years until their family members or other beneficiaries are ready to take it out.

If you're beginning to think about retirement and retirement planning, considering a Roth IRA could very much benefit you and your family for years to come. Are you ready to learn more?

For more information about Roth IRA accounts and the retirement planning process, connect with the team here at American Investment Planners LLC today! Our experts can provide you with a savings strategy that carries your family for generations and generations. To get started, please give us call at (516) 932-5130.