Advantages & Disadvantages of Roth IRA
Roth IRA is a financial product which is creating ripples of excitement and expectations in this country. It has in fact shown a new direction to people who are desirous of having the best possible returns which they can use for living a comfortable life post-retirement. One point which makes this product so popular is the safety element coupled with reasonably healthy returns. Hence there is no doubt that this financial product, whose brain child is Senator William Roth, is so much in demand amongst people who dream of a retirement life that is financially secure and comfortable.
There are many other retirement plans available in the market, which are also doing quite well. However, the advantage of this plan over other IRA products is mainly related to the tax benefits that come with this product. All other Roth IRA products have what is called taxable benefits post-maturity or on premature withdrawals as and when applicable. In other words, whenever a customer wants to use these funds for his or her retirement purposes, they have to pay a tax on such withdrawals and are given only the remaining proceeds post tax deduction.
This is indeed a big blow for many investors who are on the brink of ending their active professional life and would not like to see their hard earned income being subject to tax. However, in the Roth IRA product, tax is not deducted on maturity payments. Alternately, what is done is that the tax element is taken care of when the customer starts depositing money in the initial stages. As a youngster, who is the active period of his or her professional life, a person would not mind paying tax on his deposits because he or she is aware that when it comes to retirement they would not be taxed.
However, on the flip side, there is a school of thought which believes that for getting these tax exemptions the customer has to wait till his or her retirement, which indeed is too long a period.
There are many other retirement plans available in the market, which are also doing quite well. However, the advantage of this plan over other IRA products is mainly related to the tax benefits that come with this product. All other Roth IRA products have what is called taxable benefits post-maturity or on premature withdrawals as and when applicable. In other words, whenever a customer wants to use these funds for his or her retirement purposes, they have to pay a tax on such withdrawals and are given only the remaining proceeds post tax deduction.
This is indeed a big blow for many investors who are on the brink of ending their active professional life and would not like to see their hard earned income being subject to tax. However, in the Roth IRA product, tax is not deducted on maturity payments. Alternately, what is done is that the tax element is taken care of when the customer starts depositing money in the initial stages. As a youngster, who is the active period of his or her professional life, a person would not mind paying tax on his deposits because he or she is aware that when it comes to retirement they would not be taxed.
However, on the flip side, there is a school of thought which believes that for getting these tax exemptions the customer has to wait till his or her retirement, which indeed is too long a period.
