7 Key Reasons Why You Should Open a Roth IRA?

Why should you open a Roth IRA account? A Roth IRA account allows you to withdraw funds from your retirement account without paying any tax.

You can open a Roth IRA account with any investment broker. But first, you need to research if they are legit. About 41% of millennial opened a Roth IRA account to help them save for retirement in 2018.

Read on to learn more about the reasons why you should open Roth IRA account.


1. Save for Retirement and Enjoy No Mandatory Minimum Distribution

An IRA is a financial account that enables you to save for retirement. This decreases the burden of having no funds when it comes to your retirement time. The individual retirement account is of two types the Roth IRA and the traditional IRA.

Additionally, with the Roth IRA account, you are not obligated to take mandatory withdrawal after the age of 70.5. If you want to reach a certain financial goal, then you can wait it out until you have enough savings. Other accounts have minimum distribution (RMD) where you are forced to take distributions or penalized for not taking the required amount.

2. You Get A Backup Emergency Fund

Although a Roth IRA is a retirement fund accounts, you will not be penalized once you withdrawal the funds during an emergency. This allows you to still survive in case of a job loss, injury, or any other complications.

This means that the funds in your account can sustain your lifestyle until you get back on your feet. This can be a major reason as to why you should open a Roth IRA account. You need to have an emergency fund that you can withdraw from in case of emergencies.

The world is unpredictable, and a lot can happen that can cause you to require funds. When this happens, knowing that you have a steady savings account that you can reach and get yourself out of the predicament is comforting.

3. You Can Use The Funds To Get Your First Home

Buying a home can be costly, and most first time homeowners spend all their savings in getting their dream home. If you have a Roth IRA account, you can use the funds to get a new home or gift your loved one their first home.

However, the money can only be used to buy a home and not to do any other projects. You can pay the down payment and the closing costs of the new home.

You should aim at utilizing the Roth conversion strategies. The money withdrawn to pay for the home is tax-free. However, you can only get the money to buy the home after you continuously save for five years.

4. Fund Your Education

The student's loan has been piling up and crippling most of the millennials financial status. You can opt to pay college education for your grandchildren using the Roth IRA funds. This will reduce the burden of applying for students loans.

Also, education funds transfer is tax-free. However, if you withdrawal the money for expenses it is taxed. It is advisable that you transfer the money directly to your education account. Most parents don’t want their children to learn using student loans.

This is because they know how hard it was for them to repay and clear the student loan debt. Having a Roth IRA account can help them in funding their children education. The money is transferred from the Roth IRA account to an education account to avoid being taxed.

5. The Savings Are Not Taxed

Roth IRA contributions are made after income taxes are taken out, so in case income taxes rise in future as predicted, then you will be saving money. You won't pay any taxes on the withdrawals.

This is what makes the Roth IRA savings fund attractive. The fact that your money is not taxed when you make a withdrawal is appealing to many. The logic behind is, IRA funds are deposited after you have been taxed.

This does not make sense to them to tax the money that has already been taxed. This allows your earnings to build over time tax-free. Taxes can build up and can reduce the amount of money in your account. Having tax free savings helps you to account for every dollar in the account.

6. You Can Continue Saving Past The Age Of 70 And A Half

Most of the retirement accounts don’t allow you to continue saving after the age of 70.5 years. They force you to stop saving even if you have a steady income. Continuing savings in the Roth IRA account helps you achieve some of your life long dreams like funding college for your grandchildren.

Additionally, it allows you to fund for your children’s first home and help them out financially. You can comfortably continue saving with a Roth IRA saving accounts and ensure that you have enough savings to sustain you later.

As long as you are employed, and getting a steady income from your business or having income from your pension fund, you can still save.

Most of the retirement savings fund assume that at 70, you need to stop the savings and take a break. You would be forgetting that at 70, you might still be kicking it and living your life to the fullest.

7. Have A Tax-Free Income To Your Heirs

Nobody wants to think that one day, they will not be around to see their children prosper. But that’s a way of life. You can ensure that your heirs have considerable financial resources to depend on.

When you have saved enough cash, your heirs can withdraw it tax-free. This will enable them to be able to come out of any financial situation and learn how to save.

Since the amount is tax-free, they can account for every single dollar in the account and come up with a plan to use. This ensures that they get a comfortable life even after you are gone.

Bottom Line

Roth IRA is a great investment tool that benefits you when you retire. Moreover, the Roth IRA is very flexible, and this allows you to accomplish a lot of financial goals.

Roth IRA allows you to save your money for retirement and any emergency. This will enable you to make fund withdrawal from the account without being taxed.

Open a Roth IRA account today and enjoy the benefits in your retirement. Also, the fact that you can access your funds after five years of saving allows to pay for your education or put a deposit on your mortgage.