Today let’s take a look at how the Roth IRA can help you retire sooner. Here are three reasons why the Roth IRA is a great way to help you retire sooner rather than later.
#1 Money grows tax-free and is taken out tax-free
Tax-free growth and tax-free withdrawals makes it one of the best, if not THE BEST, way to save for retirement. There are a ton of investments you can put into a Roth IRA. Here is a short list: stocks, bonds, stock mutual funds, bond mutual funds, ETFs, precious metals i.e. gold and silver and coins. Pretty much any kind of investment that has a value. I even heard of people putting in real estate into a Roth IRA.
Now over time hopefully you developed a diversified portfolio with many different types of investments. Maybe you hit a home run with one of stock picks. Got a hot stock like Google when it came out.
The main disadvantage in any retirement account is that you cannot deduct loses from your investments. However, with the Roth IRA you potentially could have a couple hundred percent gain that you do not have to pay taxes on when you retire.
#2 $10,000 a year maybe $12,000 a year
If you are married couple the IRS allows you to put in up to $10,000 a year in a Roth IRA, $5,000 per individual. If you are over age 50 that figure goes up to $12,000 a year, $6,000 per individual.
Start saving $10,000 to $12,000 a year for the next 10 to 15 years and you could have a sizable nest egg. Remember #1 is you can receive tax-free withdrawals. No taxes is a good thing. Here’s a quick example at 12% per year for 15 years. That $12,000 per year would grow to over $440,000 over that time frame. The account would grow even more because remember you are not withdrawing the entire $440,000 when you retire.
#3 Withdrawals before age 59 1/2
Here is one tip many people do not realize. You can actually withdraw money from your Roth IRA before age 59 1/2 and avoid the 10% early withdrawal penalty.
How do you do this?
Well the money you invested in the Roth IRA can be withdrawn without penalty. The amount is not your earnings only the amount you put into the Roth IRA in the form of mutual funds or individual stocks. The other part is the Roth IRA had to be open at least 5 years. (Check with your accountant before you do any of this because everyone’s own individual situation may be different) Always need to add a disclaimer, but reason #3 should be available for most people.
What these three reasons why a Roth IRA can help you retire sooner are things called options. If you open a Roth IRA it can give you additional options that won’t be available by not having a Roth IRA.
I wish all of you Baby Boomers a successful retirement savings and retirement.
Teddy "Dutch" Danfield has been working in the finance related field for over 15 years. My goal is to assist and help Baby Boomers retire successfully. I to want to provide ideas and strategies they can implement into their own personal financial plan.
You can find additional articles and strategies at my website http://www.retirementsavingstoday.com