Smart Benefits from Having a Roth IRA

When thinking about wealth-building investment options, a Roth IRA is one of the investment tools that should be top of mind. That is because a Roth IRA has many advantages over some of the other wealth-building options that are available. One of the biggest advantages is tax free growth of your investment for life once certain conditions are met. In addition due to rising inflation this year, the inflation adjustments by the IRS on Roth IRA income eligibility and contribution maximums are all increasing starting in January 2023. With so much to gain from having a Roth IRA, let’s explore why this is definitely one of the investment tools you want to own as part of your wealth-building portfolio.

To start, let’s understand what an IRA is. An IRA is an Individual Retirement Account. It was created as a tool for individuals to set money aside towards her/his retirement. Since it is designed to assist with retirement, that means it is a long-term investment and not money that should be relied upon for everyday use. It should be part of your long-term wealth-building plan.

Now, let’s discover the benefits of a Roth IRA as part of your wealth-building strategy. What makes a Roth IRA different from a Traditional IRA? Well, a Roth IRA has some key differences that provide more value for a long-term saver. Among these are tax free withdrawals for life. Before we cover that big advantage, here are a few other benefits to take advantage of with a Roth IRA investment.

First, Roth IRAs like Traditional IRAs can be setup with automatic monthly contributions. Contributions can start from as little as $25 ~ $100 per month as long as the account is setup as automatic contributions. This is the best way to make your wealth-building part of your everyday monthly budget.

Second, because Roth IRAs are such great investments, there are income limits for who can contribute directly into a Roth IRA account. The good news is that the income limits and the amount that you can contribute to a Roth IRA are increasing starting in January 2023. Please see the following Table1:

Table 1

These next three benefits are specific for Roth IRAs and what makes this investment option so special.

Third, for Roth IRAs you are able to withdraw your contributions at anytime with no penalty. Remember this is for your contributions only, not the growth from your investment. However please resist the temptation to withdraw your investment early to give it more time to grow to meet your wealth-building goals.

Fourth, Roth IRAs do not have Required Minimum Distribution or RMDs when you retire and reach age 72. What this means is that you get to decide when you access your money and you do not have to follow the RMD rule. Other pretax investments like a Traditional IRA or a 401K does require you to take a distribution at age 72 whether you need the money or not. This could impact your tax bill for that year. That is not the case with a Roth IRA. As you will see, no taxes are due on your Roth IRA withdrawals.

Finally, one of the best benefits of all for your Roth IRA; withdrawals are tax free for life after you have held the account for at least 5 years, and you are 59 ½ years old or older. This means your contributions as well as the growth of your investments. You can withdraw it when you want, and it is completely tax free for life. Now that is truly amazing.

If this doesn’t get you excited about opening your own Roth IRA account, I am not sure what does. Don’t wait any longer.Get started with your Roth IRA investments today. Paycheck to Wealth is here to help you with your Roth IRA wealth-building investment. Contact us today to learn more about the special benefits of owning your own Roth IRA.