Use
this versatile account to get tax-free income and a whole lot more.
If you are used to a traditional
IRA, the Roth IRA may seem peculiar at first when it comes to retirement
accounts. So here’s a brief refresher on all the perks of the esteemed Roth
IRA.
A recent Kiplinger’s article, titled “Why You Should Open a Roth IRA,” makes
the case for understanding this savvy retirement tool.
Essentially, the Roth IRA is the
inverse of the regular, plain-vanilla IRA. The latter is all about taxation,
which is deferred until the time you take distributions voluntarily or
involuntarily when you are required to take “Required Minimum Distributions”
(RMDs).
Conversely, Roth IRAs make you
pay the tax upfront, but then let them grow without taxation thereafter. In
fact, after this upfront tax on the initial investment, no income taxes will be
owed thereafter.
Roth IRAs offer a very specific
benefit when it comes to estate planning. Clearly, eliminating those pesky RMDs
and future income taxation altogether can help you preserve assets for yourself
now and your heirs later.
Reference: Kiplinger
(September edition, 2013) “Why You Should Open a Roth IRA”