1 Excellent Retirement Savings Account You'll Wish You Opened Sooner
The earlier you start contributing to a Roth IRA, the more it will help your retirement plan. However, many people don't take full advantage of this retirement account's tax benefits. Consider the strengths and weaknesses of a Roth IRA, and use these accounts to your advantage as you build a retirement plan.
Roth IRAs offer special tax treatment for the gains you accrue on the investments within them. Eligible investors can contribute a certain amount of their after-tax earnings to these accounts annually. Unlike contributions to a traditional IRA or 401(k), those contributions won't reduce your taxable income in the year you make them.
However, the Roth IRA sets itself apart when the time comes to spend down your retirement savings. All the returns that you've amassed over the years can be withdrawn without any taxation. Distributions from qualified accounts like 401(k)s are subject to ordinary income tax. Distributions from normal brokerage accounts are subject to capital gains taxes as positions are closed. This means that Roths are optimized for high-upside investments, such as growth stocks.
Source Fool.com
