Raving About Roths

Why a Roth IRA might be the best retirement account

Saving as much as possible for retirement is important. Where you stash those funds is just as vital. Here’s why you should consider putting your golden years nest egg in a Roth IRA.

Withdrawing contributions

With a Roth IRA, you can withdraw contributions at any time for free. That’s not the case with a traditional 401(k) or traditional IRA, as you can’t make free withdrawals until you reach age 59.5. The key here is that your Roth IRA contributions are after-tax. Now, should you make early withdrawals from your Roth IRA? No. But the flexibility of this penalty-free option is nice to have.

No Required Minimum Distributions

As USA Today notes, with a traditional 401(k) or traditional IRA, you must take Required Minimum Distributions (RMDs) after reaching age 72. If you don’t, you’ll face a steep penalty. The Roth IRA has no RMDs. That means you can take the money at your own pace.

Distributions Don’t Impact Social Security

Distributions from a 401(k) or traditional IRA count against you when the IRS calculates your Social Security benefits. However, distributions from your Roth IRA don’t. That means you can take as many distributions as you want without having to worry about how it impacts your Social Security payouts.

No Taxes During Retirement

With a Roth IRA, you won’t have to worry about taxes on distributions during your golden years. That’s not the case with a 401(k) or a traditional IRA — withdrawals from both are taxed as income.

Chris O'Shea