02/02/2023
What exactly is a ROTH IRA?
Here is an interesting article you may want to take a look at:
https://smartasset.com/retirement/what-is-a-roth-ira
As an entrepreneur who is not a financial adviser, but works in the financial services field, I am unable to provide any specific financial advice or recommendations.
However, I am able to share information and help educate others about their options so they can make decisions for themselves.
This article can be very helpful for anyone who is trying to get a handle on their financial future and goes into some of the details that we should be aware of.
Here is a short summary and my personal opinion below:
PROS
1-Unlike an IRA and a 401(k), a ROTH IRA allows us to save money AFTER TAX.
With over 30 Trillion in national debt, do you think taxes will rise or fall in the future as the debt comes due? By paying the taxes today, we are at least able know that rising rates in the future wont eat away at our savings whenever the time comes for us to withdraw
2-"The younger you are, the more you stand to gain from opening a Roth as part of your retirement savings plan. Any money you contribute now will have more years of compounding and growth."
Unlike 401(k)'s, stocks, mutual funds and other traditional approaches where you pay tax on your gains, you'll be able to enjoy the miracle of compound interest and keep every penny you've gained.
3-"If you make an early withdrawal before 59 1/2, you will have to pay income taxes on the earnings, but you can avoid paying a 10% penalty as long as you withdraw the money for a specific need like investing in a first home, or paying for education expenses, and other qualifying exceptions."
Cons
1-You can still lose money when the market crashes.
2-Penalties can apply if you need access to your funds before 59 1/2.
3-You cannot benefit from leverage. There is a cap on how much you put in and if your income goes up, you can lose the ability to contribute.
My Opinion
For many people, I can see how the ROTH IRA offers advantages compared to traditional approaches on savings; but there may be other options out there which can offer more benefits.
Specifically, I specialize in helping clients utilize something called LIVING BEENFITS which offers many of the advantages, without some of the drawbacks discussed in the article:
1. Income Replacement: In the event of illness, one can access funds to cover years of expenses, even after only making a few payments (while the ROTH IRA only gives access to the amount in the account)
2. Access to Cash Value: Once funded, you can use your dollars anytime, for any reason, without penalty and without paying taxes.
It would still take 3-4 days to hit your bank account, but you could use the funds for real estate, gifts, vacations etc.- without ever having to ask for approval or pay outlandish interest rates or closing costs.
3. Upside potential, downside protection: Your savings will never lose a single penny due to market crashes, but you have the opportunity to grow when conditions are positive.
95% of Americans are not yet aware that they could qualify for Living Benefits- my personal mission is to change that fact!
For more information about traditional savings alternatives, please contact a financial planner.
If you have not yet learned about Living Benefits and are curious to see how they work, contact me to set up an appointment.
Let's go over the details together and see what type of plan you may qualify for.
Find out the facts so you can make an informed decision that will maximize your hard earned dollars.
