2. You can always withdraw what you have contributed without taxes and penalties
A lesser known feature of the Roth IRA is the ability to withdraw your contributions whenever you want. This may sound too good to be true – especially if you are warned not to touch the money in your retirement accounts until you reach your golden age. But there is a certain flexibility with the Roth IRA that makes it a little more attractive than other investment vehicles.
Let’s say you invest $ 5,000 in a Roth IRA and the value of your investment grows to $ 7,000. If you need money, you can always withdraw the original $ 5,000 whenever you want – without asking questions. To see also : Navigating taxes in retirement | Business. The value is $ 2,000 earnings on your account that would trigger an alarm and trigger taxes and penalties. But there’s a catch: Once you withdraw the money, you can’t return it to the account later.
3. You don’t have to worry about the required minimum distributions
When you’re in your 70s, you might appreciate this benefit a little more: Roth IRAs don’t required minimum distributions (RMD).
RMDs are the minimum mandated amounts that investors must withdraw from tax deferral plans deferred after the age of 72. For other types of accounts, these distributions are subject to normal income tax, so RMDs can withdraw your tax account. This could be painful for retirees who have multiple sources of income who may not want to force the withdrawal of pension funds they do not yet need from their tax accounts.