What are the advantages of a Roth IRA?

Here are some of the main advantages of Roth IRAs.

• Tax Advantages: Although contributions are not tax deductible, the earnings do accumulate tax free. Deposits are taxed up front, but the future payoff could be greater.
• Extra Withdrawal Options: After five years with a Roth, qualified homebuyers can withdraw up to $10,000 per lifetime before age 59 ½, tax-free for a first-time home purchase.
• Liberal Eligibility Rules: You cannot be prevented from opening one just because you are covered by a retirement plan at work or contribute to a self-employment plan such as a Keogh account. And if a child earned $3,000, a parent could put $3,000 into a Roth IRA for a child.
• Wholly Tax-free Withdrawals: Roth IRAs can also be an estate-planning tool—with no mandatory withdrawal age, funds can compound for a heir.

As in any tax situation, consult with your tax advisor, review IRS Pub 590 or consult the IRS website.