Every single dime that you gain in an Roth IRA is entirely tax free when you withdraw the money! In this example, you contribute $5K which grows into $500M, meaning your gains are $4,995,000 with zero tax when you withdraw that money….(read more)

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As we all know, saving for retirement is important. Whether it’s through a 401(k), traditional IRA or Roth IRA, we put money away to ensure we can enjoy our golden years. But did you know that the gains on a Roth IRA are tax free?

First, let’s define a Roth IRA. This type of IRA is funded with after-tax dollars, meaning the money you contribute has already been taxed. However, the benefit of a Roth IRA is that all the money you withdraw is tax-free, including the gains.

This means that as your investments grow, you don’t have to worry about paying taxes on those gains. For example, if you contribute $6,000 to your Roth IRA for 10 years and it grows to $100,000, all $94,000 in gains is tax-free.

Additionally, Roth IRAs have no required minimum distributions (RMDs) during the account owner’s lifetime, which gives you greater control over your retirement income.

Now, you may be wondering why more people don’t have Roth IRAs. One reason is that traditional IRAs and 401(k)s offer an immediate tax break, meaning you can deduct your contributions from your taxable income. But remember, withdrawing from a traditional IRA or 401(k) means paying taxes on that money in retirement.

Another reason may be that Roth IRAs have income limits, meaning if you earn above a certain amount, you may not be eligible to contribute. However, there are ways to work around this such as contributing to a backdoor Roth IRA.

In conclusion, the tax-free gains on a Roth IRA is a major advantage for retirement savings. While there may be restrictions and limitations, it’s definitely worth exploring and considering as part of your retirement planning.