What is a Roth IRA?

In case you missed it earlier this week we published a short update on how the coronavirus outbreak could be impacting your finances. You can find the blog post we’ll be updating regularly here: https://blog.brightdime.com/2020/03/19/coronavirus-covid-19-updates/

Last week we covered the Traditional IRA so this week’s focus will be on the Roth IRA. Roth got its name from its chief legislative sponsor, Senator William Roth of Delaware back in 1997 (there is your trivia for this week!). Remember that a traditional IRA is generally funded with pre-tax dollars (a tax deduction is available if you qualify in the year you make the contribution.) In contrast, a Roth IRA is an after tax retirement account, meaning there is no tax deduction up front. You may be thinking, where’s the benefit? The tax benefit comes in retirement, when your Roth distributions (the money you take out of the account) are tax free. The idea is that if you think your taxes are lower now than will be in retirement, Roth is the way to go. Start investing now and let your money grow tax free for many years to come. It has become increasingly popular in recent years due to the cut in tax rates. Not sure which is right for you?
Read our full article for all the details on the Roth IRA.