You have to watch this video of personal finance blogger, Kevin McKee, singing about his love for ROTH IRAs. It’s hilarious! I love the chipmunk vocals. He does a parody of Bruno Mars’ hit song “Just the Way You Are.” McFee blogs over at Thousandaire.
Besides this hilarious song there are many other reasons that may make you want to consider investing in a ROTH IRA.
1) Money can grow tax free AND can be taken out tax free – When you contribute to a ROTH IRA you are able to contribute money that has already been taxed. Unlike a traditional IRA, there is no tax deduction. This means that any growth or earning from the account is fre from federal taxes. The money that you take out in retirement with also be tax free. In many cases they are usually free of state and local tax as well.
2) No minimums – With Roth IRA’s there are no minimum required distributions. That means that you can contribute as small of an amount as you desire to your IRA without being penalized.
3)Use at any time – Unlike with a 401 (k) there are no penalties for dipping into your ROTH IRA. This means that if you wanted to, you could take out 100% of your money at any time without incurring a fee. That’s a great advantage, since you never know when emergency may strike and you’ll need that extra cash.
4) No Age Maximum – You can contribute to a ROTH IRA as long as you are working. There is no age maximum that would hinder you from adding money to your account. This is different than a traditional IRA. With a traditional IRA you cannot contribute if you are over 70 1/2 years old.
What do you think is the better option a 401 (k) or a ROTH IRA? I know people who have both, neither, and those who swear by one or the other. This list of benefits of a ROTH IRA is making it sound very worthwhile (the song doesn’t hurt either!). The main complaint I would have is that since this is a personal account my employer would not be matching my contributions. Considering, many companies have stopped matching anyway, a ROTH IRA may be the best option. What do you think? Will you be opening a ROTH IRA?