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Jeff Fleming
What Are the Tax Advantages of a Roth IRA?
Question:
You say that money can be withdrawn tax-free from a Roth IRA at age 59 1/2. My assumption would be that Uncle Sam gets his money when I make deposits and/or while the money is sitting in the account. Therefore, what is the advantage? We still are paying taxes on the money, no?
Answer:
IRA rules became a little trickier when the Roth IRA was introduced, and keeping straight the differences between the traditional IRA and the Roth IRA can be challenging. Roth IRA contributions are not tax deductible, unlike contributions to its counterpart, the traditional IRA. This means your contributions are made with after-tax dollars and you receive no income tax break for Roth IRA deposits.
Where's the Advantage?
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