What Are Some Benefits to Opening a Roth IRA?


Quick Answer

A Roth IRA offers several benefits, including earnings that grow tax free and contributions that are always penalty and tax free, according to Schwab. Once the account has been opened for 5 years and the account owner is at least 59.5 years old, the earnings in the account are always free of taxes and penalties. Moreover, distributions are not required at any age unless the account holder opts to take them, and there is no age limit for starting a Roth IRA.

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Full Answer

Roth IRAs offer several benefits for account holders when funding their accounts, including the ability to convert traditional IRAs to Roth IRAs, notes Schwab. Account holders can also fund the account with old 401(k) plans by rolling the account over into a Roth IRA or transferring an IRA to a Roth IRA. In addition, Roth IRAs offer many investment options, including money market funds, CDs, ETFs, bonds, stocks and mutual funds.

There are some downsides to Roth IRAs. People with incomes above certain levels are not eligible to start Roth IRAs, so not everyone can benefit from this type of account. Also, the contributions made to a Roth IRA, unlike some types of traditional IRAs, are not tax deductible.

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