Can Roth IRAs Make You Rich?
No guarantee exists of becoming a millionaire, but reaching a tax-free seven-figure retirement balance with smart Roth IRA investments and compound interest is within your grasp.
Roth IRAs provide an alternative retirement account option, permitting you to withdraw both contributions and investment earnings tax-free up until age 73.
Careful investment of your Roth IRA contributions will enable them to grow over time. Working with a financial advisor, your contributions may grow even faster as returns accrue over time. They can assist in choosing an optimal portfolio to suit both your comfort level and time horizon for retirement, with consideration for market volatility and inflation.
Your investments could include stocks, bonds, mutual funds, ETFs and CDs. When choosing your broker or advisor for investing, make sure they offer competitive trade commissions and expense ratios; or consider opting for an automated advisor with no transaction costs and fees (also referred to as expense ratios). Many people like setting up automatic contributions through payroll deductions or withdrawals from checking or savings accounts — this helps make sure money stays out of sight while remaining accessible should an emergency arise and require withdrawal without penalties being assessed against it – an advantage exclusive only available with Roth IRAs!
Roth IRA investments allow your contributions and earnings to accumulate tax-free. Your account can hold stocks, bonds, mutual funds, ETFs (exchange-traded funds), real estate or even small businesses – whatever best suits you and your risk tolerance. Invest the money yourself or work with a brokerage or robo advisor that will manage it on your behalf for an ongoing fee based on what matches up with both age and risk tolerance.
Many wealthy individuals have amassed billions in Roth IRAs to reduce their tax bill at withdrawal time. Unfortunately, conversions from traditional IRAs incur income taxes upon conversion as well as possibly incurring a one-time 3.8% net investment income tax liability; however, through making small conversions over multiple years and only withdrawing qualified expenses withdrawals you can mitigate or avoid these consequences altogether.
If you are over 59 1/2 and have owned your account for at least five years, withdrawals–both contributions and earnings–can be taken tax free. This provides flexibility if the funds need to be used for something like purchasing your first home; however, qualifying distribution criteria must also be met in order to be counted as such (the IRS doesn’t permit untaxed contributions or earnings withdrawals from an IRA account).
If you withdraw more than your contributions before reaching 59 1/2 and withdraw more than your contributions, income taxes and an early withdrawal penalty of 10% will apply. It’s wise to keep a Roth in play so compounding can take its course; additionally, tax-free withdrawals can be taken to cover active duty service obligations or pay an IRS levy; in case of disability there may also be no penalties applied – making this powerful benefit available to help ensure you live the retirement lifestyle you envision!
If you’re ready to invest in your retirement future, open a Roth IRA with an eligible financial institution. When selecting an IRA provider, look for one offering access to long-term investments such as stocks and mutual funds; also ask about any fees related to buying/selling investments easily or transferring/liquifying assets in the account.
Consider selecting a custodian who offers low or no account fees and allows for regular contributions throughout the year to help meet your savings goals. Also inquire as to your investment options, such as diversifying your portfolio which can ensure long-term investing success.
If you need assistance with your investing plan or are feeling lost when it comes to where to begin, try our SmartVestor program, which links you with RamseyTrusted investing pros nearby for free. They will get to know you better as they understand your priorities and goals, helping to navigate all the choices within your account.