Roth IRAs: A Basic Introduction
Navigating the finance world is tricky for most people without a solid financial background. If you’ve ever wanted a basic explanation of what a Roth IRA is, we’ve got you covered with this article.
Somewhat similar to a brokerage account, a Roth IRA is a retirement account that should be considered if you plan on paying higher taxes in your retirement. Taxes are paid on the money that you deposit into the account. Future withdrawals after the age of 59 ½ are tax-free, with few limitations. Vanguard, Charles Schwab, Fidelity, and several more companies offer this kind of account.
There are a few caveats (when are there not?) to this account. Withdrawals will have a 10% early withdrawal penalty if you withdraw before the age of 59 ½. However, there are several exceptions that waive this fee: a first-time home purchase (up to $10,000), college expenses, birth or adoption expenses (up to $5,000), or if there is a case of death or disability. These withdrawals also must be taken after a five-year holding period; thus, investing in your early fifties at the latest will help you to maximize your gains with this kind of account before you retire. While your money is invested within this account, you’re able to invest in stocks, ETFs, bonds, mutual funds, and more options.
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These are some very basic facts about a profoundly complex system of money management. We at The Modern Day Wife strive to produce a short introduction to these financial management tools so that our readers will be more informed when selecting their retirement accounts. We’re going to be covering Traditional IRAs, SEP IRAs, and so many more accounts to educate and empower our readers. Comment below to tell us what you’d like to know about money management!
Note: The Modern Day Wife is not a financial advising company. Please consult a trusted financial advisor should you have any questions about the topics of our articles.