Basics of a Roth IRA

If you barely know what a Roth IRA is, this one’s for you. Basically, there are three times that the government wants to take your money. When you make it, when you grow it, and when you distribute it. IRAs and Roth IRAs help you get out of two of those three tax types. Side note: Avoiding all three is called tax evasion and that comes with a jail sentence. Don’t do that.

Back to the script. If you put money into a Roth IRA, that money has already been taxed in the form of income tax. The advantage to putting money there is that anything you learn in terms of investment growth is generally tax free if the account is at least 5 years old and you pull money out either at retirement or for another qualified reason, that money is tax free as well. So, as your tax accountant might advise you if you’re making less money now than you will be later and you are there for an a lower tax bracket now than you might be later, funding a Roth IRA could be a pretty good decision.

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