Building A Tax-Free Future with A ROTH IRA

Estimated reading time: 2 minutes(Last Updated On: April 26, 2021)

Everyone has a plateful of financial goals that seems to grow by the day. There are those who are looking to buy their first homes, repay their student debts, or make significant investments in autos or real estate. However, there is still one more thing that concerns them – how to secure their future. Everybody wants to build wealth for the future.

While there are so many ways of doing it out there, there is no better way for building wealth than to leverage tax law to create tax-free wealth. Contrary to the 401(k) and traditional IRA investment plans, Roth IRA is the best option for many.

What is a Roth IRA?

This is a tax-free wealth-building tool that has been attractive for various reasons, such as the following:

• Any qualified distributions you make are 100% tax-free and penalty-free.
• There are no required minimum distributions (RMDs) for Roth IRAs.
• The Roth IRA allows you to keep saving indefinitely.

When can one withdraw their Roth IRA wealth?

Contributors can withdraw their Roth IRA contributions and earnings at any time. However, contributors will have to pay taxes and penalties on the distribution if they choose to withdraw earnings before their account has been open and funded for at least five years and is under 59.5 years. Moreover, if a contributor decides to withdraw their money to cover education expenses, buy a first home or for reimbursement of medical cost, the withdrawal will not incur any penalties.

How to build wealth with Roth IRA?

The current maximum contribution per year to a Roth IRA retirement savings account is $6,000 and a catch-up contribution of $1000 for those 50 years plus. If someone, for instance, starts investing with a Roth IRA at the age of 35 years and retires at 68 years, they will have accumulated close to $1 million completely Tax-Free. That is based on the total amount contributed earning compound interest at a rate of 7%.

Ultimately, the Roth IRA is a good vehicle for anyone looking to grow funds tax-free. However, it can be difficult to navigate for the first-timer. To excel, you may need to work with an expert to help you through the process of creating your retirement savings account. Here at Quest Trust Company, we can help you understand the Roth IRA and how to make smart investment decisions.

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