What are the key benefits of a Roth IRA?
The Roth IRA is quickly becoming one of the most popular investment vehicle choices made by Americans and it is no surprise why. A Roth account can save you from shelling out a ton of money in taxes when it comes time to retire. If you set up a self directed Roth IRA then you can double down on the benefits of less taxes and a wide range of high earning investment choices. We put together this article to help shed light on some of the key benefits of a Roth IRA.
The most profound benefit delivered by a Roth IRA is the ability to take tax-free contributions. A person can contribute after-tax income into the account up to a specified amount each year. Then, the earnings inside that account are grown tax-free. For example, if you started a Roth IRA with $50,000 and it grew to $100,000 then you would not pay taxes on the $100,000 when you took withdrawals. This is a huge advantage because the money you start the account with is usually less than what the account grows to and therefore you pay significantly less in taxes.
With a Roth IRA, time is on your side. The earnings inside of a Roth account are tax free and that means that it benefits you the most to start the IRA as early as possible. Ever heard of the power of compounding interest? Well, imagine compounding interest inside of an account for 20 years and never paying taxes on those earnings.
Now, it is also possible to set up a self directed Roth IRA. Self directing the account opens up a whole new world of investment options like rental homes, trust deeds, tax liens, and much more. These investment options can result in high earnings in many cases. Combine that with the tax advantage of a Roth IRA and now you have one powerhouse of an investment vehicle.
Want to learn more about other benefits of a Roth IRA or different account types? Please head over to our Knowledge Base section of USelfDirect.com for more insight.