Roth IRA Explained for 2024 (Tax-Free Retirement Account)

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In this video I'll explain what a Roth IRA is, who they're for, when to contribute, and where, why, and how to open one. After watching this video you'll have a much better understanding of this retirement account type and whether or not it may be a good fit for you in 2024.

// TIMESTAMPS:

00:00 - Intro
00:14 - What Is a Roth IRA?
00:38 - Who Can Contribute To a Roth IRA?
00:49 - How Does a Roth IRA Work?
02:16 - Roth IRA Investments
02:32 - When To Contribute To a Roth IRA
03:19 - Roth IRA Income and Contribution Limits for 2024
04:40 - Recap
04:57 - Roth IRA Advantages
05:10 - Roth IRA Disadvantages
05:26 - How To Open a Roth IRA
05:55 - Outro

// SUMMARY:

A Roth IRA is simply a U.S. retirement savings vehicle by which investors contribute after-tax money, that money grows tax-free, and the withdrawals later in retirement are tax-free.

The Roth IRA was established in 1997 by the Taxpayer Relief Act. IRA explicitly stands for individual retirement account. As the name suggests, this is an account designed to help individuals save for retirement.

The main function of the Roth IRA is that contributions are made with post-tax dollars and then those contributions are allowed to grow tax-free and later be withdrawn in retirement tax-free. Because of this, the Roth IRA would be the obvious choice if you somehow knew you'd have a higher tax rate in retirement.

Roth IRAs do not have required minimum distributions, or RMDs, like 401k's and Traditional IRAs do. You can withdraw your contributions penalty-free anytime and you can withdraw earnings anytime after 59.5. This means the Roth IRA has arguably the greatest flexibility of retirement accounts available to Americans.

If your income is above the limits, you can use a technique called a “backdoor Roth IRA” where you make a nondeductible contribution to a Traditional IRA and then convert it to a Roth IRA.

You have a wide variety of things you can invest in inside a Roth IRA, including mutual funds, ETFs, stocks, bonds, money market funds, certificates of deposit (CDs), cryptocurrency, and more. You can even hold investment real estate in a Roth IRA.

Advantages of the Roth IRA include flexibility and a variety of investment options, tax-free growth and withdrawals, a good choice for those in a higher tax bracket in retirement, no RMDs, and a good vehicle for transfer of wealth. Disadvantages of the Roth IRA include difficulty in accurately estimating one's future tax rate, contributions are not tax deductible in the current year, reduced contribution eligibility for high income earners, and a low contribution limit compared to a 401k.

Read the blog post here: https://www.optimizedportfolio.com/roth-ira/

#retirementaccounts #rothira #retirementinvesting

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