“What Is Roth IRA, Anyway?”

Q – “What is Roth IRA?”

A – That’s possibly the best question you could ever ask. Long story short, Roth IRAs are the best way for Americans to build wealth for the future over the long-term. In other words, they rock. Especially if you’re young.

So, How Do Roth IRAs work?

Understanding the basics is easy.

You get money from your job or business, pay taxes on it just like normal, and save it in your Roth IRA. Just like a savings account.

But UN-like a regular savings account..

-You choose the investments. In a regular account, the bank uses your money to invest (and makes a ton of money off of you, btw) and guarantees you a small amount of interest. Like, 3-4% per year.

  • In your Roth IRA, you choose. You can buy stocks, bonds, mutual funds, CDs, and other investments. We can show you how to make good choices [Coming Soon]

-You can make (or lose) a ton of $$. In a regular savings account, the amount you make is small, fixed, and guaranteed. Usually like, 3-4% per year.

  • In your Roth IRA, the amount of money you can earn is basically limitless. But on the flip-side, if you make bad choices, you can lose money, too. Overall, you’re in control of your account’s performance.

-You don’t pay taxes on the earnings. This is the biggie. “What is Roth IRA, anyway and why should I care?” you ask? Well here it is. In a regular account, you pay taxes all the time, and it eats into your wealth big-time over long periods of time.

  • In your Roth IRA, you don’t pay any taxes on your earnings. The tax-savings over time are ENORMOUS.

-There’s a maximum amount you can add (contribute) in a year. In a regular account, you can put as much money in there as you want, and nobody asks any questions.

  • In your Roth IRA, there’s what’s called a ‘Contribution Limit.’ See the contribution limits [Coming Soon]

-Taking the earnings out before you reach a certain age can be a pain-in-the-butt. In a regular account, you can take all the loot out whenever you want, and nobody asks any questions. You pay taxes on the gains, and you’re on your way.

  • In your Roth IRA, you have to be careful with withdrawals (distributions). This rule seems like it sucks at first, but it really doesn’t. Once you understand the difference between earnings and contributions you’ll understand why it’s not a big deal. Roth IRA distribution guidelines [Coming Soon]

-There are certain eligibility requirements. Any Tom, Dick, or Harry can open a regular account and nobody asks any questions.

  • In Roth IRAs, you have to meet a specific set of requirements to qualify to open one. Learn the eligibility requirements to see if you pass [Coming Soon]

Explore these pages to answer the all-important question, “What is Roth IRA, anyhow?” And then enrich the lives of your closest friends and family by sharing what you’ve learned.

Go From What is Roth IRA, anyway? to Home

Go Back to the IRA Center