Dear Jason – March 2021
Will I save on taxes if I contribute to a ROTH IRA?
I am a fan of ROTH IRAs. Contributing to a ROTH IRA in 2020 will not help you save on your 2020 taxes, but it can be extremely helpful towards building your wealth. The advantage of a ROTH IRA is that it grows tax-free, and you do not pay taxes when you take it out upon reaching 59 ½. For example, say you are 30 years old and you contribute $6,000 to a ROTH IRA. When you turn 59 ½, that $6,000 has grown to $50,000. You can then take out that money at any time after turning 59 ½ and not pay any taxes on it. There are also strategies where you can access your contributions tax-free before turning 59 ½.