A Roth IRA offers several benefits, including:
Tax-free growth: The money you invest in a Roth IRA grows tax free.
Tax-free withdrawals: Assuming you wait until age 59 ½ and have met the 5 year holding requirement, your distributions will not be considered taxable income, allowing you to access both your contributions and earnings tax-free. In comparison, distributions from a traditional IRA are all considered taxable income, just like a paycheck from your employer.
No Required Minimum Distributions (or RMDs): Roth IRAs do not have any required distributions, allowing you to continue taking advantage of the tax free growth as long as you’d like. In comparison, traditional IRAs do have RMDs, forcing you to withdraw funds and pay income tax.
No age restrictions for contributions: As long as you have qualifying earned income, there’s no age limit on making contributions to your Roth IRA (or Traditional IRA).
Flexibility: You can withdraw your contributions (but not earnings) at any time without taxes or penalty. Additionally, you can withdraw up to $10,000 of your earnings tax- and penalty-free to buy your first home, assuming you have met the 5 year holding period.
Protection from creditors: In some cases, IRAs are protected from creditors in the event of bankruptcy.