A Roth IRA Individual Retirement Account is a retirement savings account that allows you to pay taxes on the money you put into it upfront. If you want to contribute to a Roth IRA, you must open and maintain it outside of your employer-sponsored retirement savings plan. When you make contributions post-tax, the money you set aside for retirement goes a lot further.
This copy is for your personal, non-commercial use only. When Michelle Brownstein started a summer job at an apparel retailer in the late s, her father made the then-teenager a deal: If she agreed to save a portion of her earnings in a Roth IRAhe would match her contributions. While there are many benefits of putting money in a Roth IRA, the strategy makes a lot of sense for people who are in a lower tax bracket today than they expect to be in retirement.
Here's how it works: if a teenage or college-aged kid has earned income i. A Roth IRA is the perfect tool, as the investment growth and subsequent withdrawals will both be tax-free in retirement. Kids do not need to be over 18 to have an IRA see below for more on that and contributions can be made by a 3rd party e.
If you remember your first summer jobyou may also recall how you liked to spend your paycheck. A shopping spree, beach trip, or new gadget, perhaps? But if you'd put that hard-earned cash into a retirement account instead and let it gather interest through the years, you'd be high-fiving your year-old self all the way to the bank.
Young people often open individual retirement accounts IRAs when they start receiving paychecks from their first job. But actually, IRAs make excellent savings vehicles for people of an even younger age. Because of their tender years, and the decades they have before them, children are poised to take full advantage of time — and the power of compounding within a tax-free account like an IRA.
A great place to start is a Roth IRA. One of the biggest perks of a Roth IRA is the tax break they offer. Instead, your contributions and earnings grow tax-free forever.
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IRAs offer tax advantages for long-term retirement planning. Earnings in these accounts can accumulate either tax-deferred or tax-free. Also, you can deduct traditional IRA contributions.
A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. There are no required minimum distributions RMDs for as long as you live. You can put money in your account for as many years as you want, as long as you have earned income that qualifies.