A Roth Individual Retirement Account (IRA) allows a taxpayer to set aside post-tax income up to a specified amount each year. Any earnings the person makes sits in a retirement account until the taxpayer reaches the appropriate age of 59 ½. However, there are many advantages to Roth IRAs which taxpayers are unaware of.
Inheriting Tax-Free Income
Taxpayers with large amounts in their IRA account can leave heirs tax-free income that they can inherit. Paying taxes on your income now can leave your children with income for the rest of their lives. Not all of the money from your account needs to be withdrawn after you hit retirement.
Contributing After 70
With a traditional IRA taxpayers are forced to stop contributing to the account after they hit 70 ½. After this point any income they make is taxed normally. A Roth IRA has no minimum distribution requirements, meaning that you can continue to contribute for as long as you wish.
Withdrawing Contributions Early
Everyone says that you’re not allowed to touch the money in your Roth IRA until 59 ½. What most people don’t know is that applies to your earnings and not contributions. You can take out your contributions as an emergency fund without penalties but your earnings will take a huge hit.
Conclusion
Having a Roth IRA has many hidden rewards that most taxpayers are unaware of. Taking advantage of withdrawing early contributions, continuing to contribute after 70, and leaving your heirs tax-free income are all unseen secret advantages within your Roth IRA.
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