Every Retirement Starts With a R .

Moment we think about Retirement, we think it's in the distant future. Something I will get to at some point. There are more pressing needs in the moment of the hour that need more attention. There are more fires to fight, debts to pay, more things that will need attention of your hard earned money than to save for retirement which seems beyond the horizon

All very valid points. All legitimate. But therein lies the power of time, and compounding. There are various avenues of saving for retirement. A 401K, a simple IRA account, both of which are tax deferred. But here we will focus on the youngest sibling of the retirement family, the ROTH IRA

What is Roth IRA

Introduced in 1997, ROTH IRA allows you to take after tax money and put it in an account, tagged as Roth IRA. The money can then grow tax free till it’s time for you to retire, at which point it can be withdrawn tax free. Essentially you will pay Zero taxes on all your investment profits at the time of withdrawal.

How to Open a Roth IRA

Any person over the age of 18 can open a Roth IRA and deposit after tax Dollars into the account. You can open an account with any fiduciary firms and banks that offer such an account. There are limitations on how much you can invest every year.

For 2023, the total contributions you make each year to all of your Roth IRA accounts can't be more than: $6,500($7,500 if you're age 50 or older) and in addition to the general contribution limit that applies to Roth IRAs, your Roth IRA contribution may be limited based on your filing status and income.

What investments to make in ROTH IRA

While this is a personal preference on what you seem fit to invest in for the long term, the options are quite a few. You can invest in stocks of individual companies that you are familiar with and have studied. Although this is a very risky strategy as you are not as diversified, your gains and or losses depend on the performance of these individual stocks. Investing in Mutual Funds gives you a much diversified

Retirement, Roth IRA, How to Open Roth IRA Accounts, Assets, Investment Options

approach over a long term. There are various kinds of mutual funds offered almost by every financial institution which offers the Roth Accounts. Mutual fund Investments range from more conservative money market, fixed income to Balanced to Growth and International Market Mutual Funds. The kind of investment you choose depends on your time horizon and appetite for risk. Higher the risk, Higher to reward, yet higher the losses during the downward wave.

While individual stocks, Bonds, Mutual Funds are very popular assets to hold in the Roth IRA account for the long term based on your risk appetite, there are also other exotic assets that you can have inside the account.

Other Investment Alternatives

You may hold 99.9% pure form of metals like gold, silver, platinum and palladium in your account.These can be held in the form of coins or bars that are minted in specific countries like USA and Canada that pass the test. The tricky part is to find a custodian who will be willing to hold these for you in the IRA account.

Real Estate is another not too obvious choice when it comes to retirement accounts. You can hold actual properties or REITs funds in your account. Apart from that the other assets that can be hold into a IRA are foreign currencies, limited-risk futures and options, mortgages and mortgage-backed securities, unit

investment trusts, energy ventures, private companies, limited liability companies, warrants, partnerships, tax liens, equipment leases, commercial loans, junk bonds, penny stocks and gold-mining shares. These higher-risk investments offer potentially large rewards. The difficulty is finding a knowledgeable IRA custodian willing to handle these exotic investments on your behalf. Most banks, brokerages and mutual funds don't want to be involved with such investments. If you find a custodian, the administration fees are likely to be high.

Benefits of opening Roth IRA

Investments made into Roth IRA can be withdrawn tax free after age 59.5
If needed, total contributions made to the account can be withdrawn tax free at any time. Although there will be penalties on any gains if withdrawn before the age limit of 59.5
Upto $10,000 can be withdrawn tax free as a one time opportunity if its invested in primary residence
Assets are passed over to the heirs
There is no minimum distribution required unlike 401K where distributions are mandatory

Although Roth is one of the newest members of the retirement family, it is designed with the millennia in mind. The power of compounding allows your money to grow tax free. While also giving you the flexibility to invest your money in a vehicle of your choosing be it individual stocks, mutual funds, index funds or some of the exotic assets as mentioned above. The key is to get started today, and you can see your retirement investments grow one Dollar at a time.

Here are some of the related products we love