Roth IRA

For some people, a Roth IRA presents a better retirement plan than a traditional IRA. You cannot deduct contributions on current tax returns with a Roth IRA. But your interest earnings are 100% tax free upon withdrawal, as opposed to tax deferred.


Another plus is the ability to withdraw principal balances without penalty. While this would diminish the money-making magic of compound interest, it provides a safety net if you need funds.

Summary
  • Interest and principal are completely tax free upon withdrawal
  • Compound interest on entire balance
  • Can contribute up to $5,500 per year
  • Additional $1,000 "catch up" contribution allowed for ages 50+
  • Principal contributions can be withdrawn without penalty*
  • Interest withdrawals can begin at age 59½
  • Early interest withdrawals subject to penalty**
  • No mandatory withdrawals at any age
  • Invest within IRA via variable rate account, fixed-rate CDs, or both
  • $500 minimum deposit to open
  • FDIC insured

*Subject to some minimal conditions.

**Certain exceptions apply, such as healthcare, purchasing first home, etc.