4 Incredible Benefits of a Roth IRA | Personal-finance | #retirement | #elderly | #seniors
2. You can always withdraw what you’ve contributed without tax or 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’ve been warned not to touch any money in your retirement accounts until you’ve reached your golden years. But there’s some flexibility with the Roth IRA that makes it a bit more compelling than other investment vehicles.
Let’s say you contribute $5,000 to a Roth IRA and the value of your investments grows to $7,000. If you find yourself in need of money, you can always take out the original $5,000 whenever you want — no questions asked. It’s the $2,000 worth of earnings in your account that would set off the alarm and trigger taxes and penalties. But here’s the catch: Once you take money out, you can’t pay it back into the account later.
3. You don’t have to worry about required minimum distributions
When you’re in your 70s, you may appreciate this benefit a bit more: Roth IRAs have no required minimum distributions (RMDs).
RMDs are minimum mandated amounts that investors must withdraw from tax-deferred retirement plans after they turn 72. With other types of accounts, these distributions are subject to ordinary income tax, so RMDs can jack up your tax bill. This could be a pain point for retirees with multiple sources of income who may not want to be forced to withdraw retirement funds that they don’t need yet from their tax-advantaged accounts.