How the Roth IRA Will Help You Reach Financial Goals

Saving for retirement is necessary to guarantee when the time comes to exit the work force, you will have adequate savings from which to live. How you manage your finances throughout your working years will play a vital role in the comfort of your golden years. By avoiding debt wherever possible and following a well thought out savings plan, you can ensure your financial security now and in the future. One of the more popular retirement plans available to individuals today is the Individual Retirement Account (IRA). There are several types of IRAs available, however the traditional and Roth IRA are probably the most recognized. Here we look at the benefits of the Roth IRA and why this type of savings plan might be the best plan to reach your financial goals.

Benefits of Roth IRA

• No mandatory distribution age- With some retirement plans, the account holder must begin taking mandatory minimum withdrawals from the account at age 70 1/2. With the Roth IRA this is not the case. You can choose whether you want to use all of your money in your retirement years or pass on your savings to beneficiaries after your death.

• Contributions can be withdrawn tax free at any time-   Despite the fact that IRAs are intended to help you save for retirement, there are situations where you may have to tap into your savings earlier. With the Roth IRA there are no tax penalties for withdrawing money (contributions) at any time. To avoid paying taxes on earnings you will have to wait until you are 59 1/2 and the account has been opened for five years.

• No age limit on contributions- You can continue contributing to your account at any age.

• Tax free growth- When you contribute to a Roth IRA you do so with after-tax dollars. While this does not offer an immediate tax advantage, your will reap the rewards later with tax free growth on your money. As long as conditions are met, you will never pay taxes on distributions from your Roth IRA.

As more and more people realize the benefits of contributing to a Roth IRA, the plan is becoming increasingly popular. While there are several advantages of using the Roth IRA to save for retirement, it is not the only option available. You should consider all options before making your final decision to make sure you are using a savings plan that best meets your current and future needs.