The Roth IRA is for Wussies!

by Fern LaRocca CFP®

in 401K,Roth IRA Rules

The Roth IRA is for wussies. Whoa! Every article under the sun is saying that the Roth IRA is the best thing since sliced bread to build wealth and I say no . Here’s why- in your do it yourself financial plan, you have to decrease taxes and keep up with inflation and you have to do that before you even try to make a profit~ Here’s why- in your do it yourself financial plan, you have to keep up with inflation and decrease taxes and you have to do that before you even try to make a profit. That is the secret to fast wealth. The best way to cover those two bases is to use tax deferred plans plans that have both features of reducing our income when we contribute and also deferring any tax on our gains.  Deductible IRAs, 403b plans, 401K plans, and 457 plans, etc. are prime examples of that . Notice I didn’t say Roth IRA. That is because you lose the tax saving benefit with the Roth IRA because youi are contributing with after tax money. So for most of us who aren’t in the Bill Gates or Warren Buffett league we need to contribute first to all of those plans that I mentioned before contributing to the Roth IRA.

Okay now I know you are freaking out because all that money you put away you can’t touch till you are age 59.5. That’s right -so go ahead and be a wussie and contribute to your Roth IRA first so you have the ability to get your greedy hands into your nest egg when you need it. You also get these other benefits of the Roth IRA:

  • You can use contributions to help pay for college
  • In retirement, all of your withdrawals will be tax free and you won’t have to withdraw annually as you would with a traditional IRA or 401K.
  • It is a great account to preserve assets you intend to pass on to your heirs

So go ahead and be a wussie if you can’t stand the idea of locking up as much money as you can in a tax deferred plan, and contribute to your Roth IRA as the next best thing. -Fern Alix LaRocca CFP® Wealth Coach

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