A Roth retirement account is a type of individual retirement account (IRA) that allows you to save for retirement on a tax-free basis. With a Roth IRA, you contribute money to your account after taxes have been taken out, which means that your contributions are not tax-deductible. However, the money you withdraw from your Roth IRA during retirement is tax-free, as long as you meet certain conditions. This can be a good option for people who expect to be in a higher tax bracket in retirement than they are currently.
The main advantage of a Roth IRA is that your money can grow tax-free, which can help you accumulate more wealth over time. With a traditional IRA, you get a tax deduction for your contributions, but you have to pay taxes on your withdrawals in retirement. With a Roth IRA, you don’t get a tax deduction for your contributions, but your withdrawals are tax-free. This can be especially beneficial if you expect to be in a higher tax bracket in retirement than you are currently.
Another advantage of a Roth IRA is that you are not required to take minimum distributions from your account during your lifetime. This means that you can leave your money in the account to grow for as long as you want, and you can pass it on to your beneficiaries after you die. By contrast, with a traditional IRA, you are required to start taking minimum distributions at age 72 (or 70½ if you were born before July 1, 1949).
Finally, with a Roth IRA, you have more flexibility in terms of how and when you withdraw your money. You can withdraw your contributions at any time without penalty, and you can withdraw your earnings penalty-free as long as you meet certain conditions (such as being over 59½ and having had the account for at least five years). By contrast, with a traditional IRA, you may have to pay penalties if you withdraw your money before age 59½.