One of the most popular retirement savings vehicles available is the Roth IRA — but what sets it apart?
First of all, when you invest in a Roth IRA, your earnings can grow tax-free, provided you don’t withdraw them until you’re 59½ and you’ve had your account at least five years.
Second, you can withdraw contributions — not earnings — at any time, without incurring taxes or penalties.
So, you could use the money for purposes other than retirement.
Third, unlike a traditional IRA or 401(k), you don’t have to start withdrawing from a Roth IRA when you turn 73.
Your income level might keep you from contributing the maximum amounts to a Roth IRA.
Even if you’re not eligible, though, you could eventually convert some of your traditional IRA or 401(k) funds to a Roth IRA.
This move could result in a sizable tax bill, though, so, before undertaking a conversion, you may want to consult with your tax advisor.
If you can contribute to a Roth IRA, either directly or through a conversion, consider it carefully — you’ll find a lot of upsides to this investment account.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor John Dickerson. Member SIPC.
