WrongAbout Is Your Investment Advisor
a Roth? While a Roth IRA
can
be a tremendous tool, the amount of misinformation
regarding their applicability and utility creates a lot of
confusion with most investors. Below, we address some
of the biggest misconceptions with Roth IRAs, and how
you might be able to use them to your advantage.
Roth IRA Tax Benefits
Created by the taxpayer Relief Act of 1997, Roth IRAs are a relatively
new creation by investment account standards. While Roth IRA
contributions are never deductible entering the account, Roth IRA
earnings can be withdrawn tax-free any time after the later of age
By: Andrew Tucker, JD, CPA, CFP®
59½ and at least five years after opening the Roth IRA. Additionally,
amounts contributed to Roth IRAs (principal) can be withdrawn
tax-free at any time and are not subject to the 3.8% Affordable Care
Act (colloquially, “Obamacare”) payroll tax on personal investment
income.
In addition to these tremendous income and payroll tax benefits,
a Roth IRA is one of the best legacy assets to leave to children. No
distributions from Roth IRAs are required beginning at age 70½, as is
true with traditional IRAs. Because of this, the taxpayer need not tap
into his Roth IRA during his lifetime, but can pass the balance down
to his children, who can stretch out distributions over their lifetimes,
allowing tax-free compounding interest to continue for decades.
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