What is a Roth IRA and why would you want one?
A Roth IRA is a retirement account which uses after-tax contributions. Meaning, whatever you deposit in the account is taxed as your regular income on your yearly tax return.
This is opposed to a regular IRA, which contributions aren't included in your income for the year.
The big benefit of a Roth IRA is that when you reach retirement age, all withdrawals are tax free. This includes capital gains - your money in the account may have multiplied over time through investment growth, but you won't pay any taxes on it.
Another lesser-known benefit is that Social security benefits are taxed based on how much other taxable income you have. So if your other retirement income will consist of just Roth IRA withdrawals, you won't owe any tax.
Important to keep in mind that only $6500 per year can be contributed to a Roth IRA each year. As well as income limits apply (modified adjusted gross income under $153K for a single and $228K for married filing jointly), in order to be able to contribute for the tax year.
You or your spouse also need to have earned income for the tax year in order to be able to contribute.
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