Is a Roth IRA Your Best Bet?
October 19, 2009 by Stephen Kersey
Filed under Finance
There are many benefits to opening a Roth IRA, not the least of which are the unlimited tax-free growth of your money as long as it is in the account and the fact that you will not have to pay taxes when you withdraw your money. You also have an amount of certainty with a Roth IRA because you know exactly how much tax you are paying on your money.
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However, traditional IRAs can also result in massive payoffs later down the line because of the fact that you get a $1,000 tax break when you deduct your full contribution. Over the years that your IRA is open, that seemingly small amount can turn into massive growth if invested wisely.
A change in taxes later on down the line can also turn out to make a traditional IRA a more prudent choice than a Roth IRA, which means that there are plenty of situations that are advantageous to both accounts. However, your best bet in most situations is to invest your money evenly between Roth IRAs and traditional IRAs to reap the benefits of both.
Another benefit of a Roth IRA is that you can withdraw your original contributions tax-free and penalty-free at any time for any reason. As a result, you’re Roth can double as an emergency savings fund or a college savings fund or any other type of savings fund you wish.