A Roth IRA is believed to be the most advantageous type of IRA plan especially when it comes to paying the taxes. With a Roth IRA, we pay taxes upon contribution — which means that it is possible for our investments to grow tax-free profits and the Roth account holders can also enjoy tax-free distributions or withdrawals upon retirement. This is actually the reason why there are plenty of investors who prefer to open a Roth IRA. It is really important for the Roth account holders to be aware of the Roth IRA rules and regulations so that they can get the maximum benefits that this IRA plan could offer.
Since the this IRA plan is believed to be very beneficial, a lot of people are wondering how to open a Roth IRA. The process in opening a Roth IRA is very simple — it is important though to make sure that we choose the best and most reliable IRA companies which offer the best Roth IRA rates possible, so we can maximize the returns from our investments in the future. It is also important to be aware of both the advantages and disadvantages from owning a Roth IRA before we finally decide to open such IRA plan.
Common Advantages of Roth IRA
There are plenty of Roth IRA advantages that a lot of people could enjoy. For instance, Roth account owners can enjoy flexibility on withdrawals and distributions. It is also easy for them to diversify the funds as a Roth IRA can hold a wide range of investment accounts. This is very important when it comes to investing as diversification of one’s funds is the best investment advice that most financial experts recommend.
One of the most popular Roth IRA pros is that there is no age limit to make contributions. This means that people of any age (even above 70 years old) may still make contributions as long as they meet the income requirements. This means that they can still have their funds grow into tax-free profits as long as they like. In addition to this, Roth account holders are not mandated to withdraw their funds at a certain age. They can keep their funds in an IRA and have them invested for as long as they desire. And because taxes are already paid upon contribution, they can enjoy tax-free withdrawals when they want.
Roth IRA Disadvantages
Just like almost any thing in this world, there are some Roth IRA cons which we need to be aware of before we finally decide to open such IRA plan. Perhaps one of the most common disadvantages of a Roth IRA is that contributions are not allowed if an individual is earning a big amount of income which may exceed the income limit that is set by the Internal Revenue Services. And since the contributions are already taxed, this means that we pay taxes at principal amount even if the investment will incur an irrevocable loss. Thus, Roth account holders must know how to invest their funds properly.
If you’re interested in learning more about opening your first Roth IRA, click here.