Roth IRA Pros and Cons List

Roth IRA has been getting a lot of attention in recent year as it is starting to be considered one of the best possible options for a retirement plan there are available out there. A lot of people see the Roth IRA as a wonderful retirement plan but other see the disadvantages on top of the advantages and with all the information out there it can get a little bit confusing to see the advantages and disadvantages clearly.

Regardless of your age and financial situation you should always study your retirement plan carefully instead of randomly picking one. There are some factors that will work for some people but these same factors might not benefit you a lot. Here are some pros and cons of Roth IRA so you can make an informed decision with ease:

List of Pros of Roth IRA

1. Investment Choices
Roth IRA is a great way to get a lot of investment options at your disposal and you can pretty much choose what you’d like to invest in. While with most retirement plans you have the freedom to choose out of a limit amount of choices with Roth IRA your choices are practically unlimited and as such it is a very desirable option for a lot of people as it gives them a lot of freedom.

2. You Can Pay the Day You File Your Taxes
Roth IRA has the advantage of allowing people to pay right up to the day in which they file their taxes instead of having to pay early like most other plans available. The payment can still be made in advance but let’s be honest: we all like to delay payments as much as possible – procrastinating with money feels good.

3. Tax Free Options
Roth IRA investments are pretty much tax free. This applies to the investments you make and not the rewards and interest that you get from it. Let’s imagine a plan in which you have invested thousands of dollars and in which you have acquired a certain amount of interest over the years.

In this plan you can withdraw all of your investments – without the interest – and pay absolutely nothing in taxes for it. This means that you will always have an emergency fund available that you can use at any given time without having to worry about it being taxed.

To know how much you can withdraw you need to consult your Roth IRA facilitator in order to understand the amount of interest and the amount of investment present in your earnings – let them do the math.

4. You Choose What You Are Going to Save
One of the biggest possible advantages that the Roth IRA has is that you can choose the amount of money you are comfortable with to put aside and save up for the future. There is no minimum investment amount and as such you can save up some money for the future even if you don’t have a very high salary. You can begin with almost nothing and save up small pieces over the years to have a lot in the future.

5. Age Doesn’t Matter
A Roth IRA is a great choice and age isn’t a factor at all with it – as long as you qualify. As long as your household incomes qualifies for the program than it is a great option to choose since you are always going to have the money available in case of an emergency. As we all know, emergencies do occur and the money being there is a huge advantage for anyone no matter the financial situation.

List of Cons of Roth IRA

1. The Tax Bracket You Are In Has An Impact
The tax bracket that you are in will end up having a strong impact on your Roth IRA investments. A lot of people have a low income right now and in the future they will have a higher income and that is a perfect profile for a Roth IRA. But some people will have a smaller income in the future and for them it is better to get a traditional IRA.

2. Income Limitations
There are income limitations you need to check with Roth IRA. For some people, it just isn’t the best possible options because of this. There is a set limit on the amount you can make every year and if you manage to do more than that with another retirement plan you should choose to go with it. In order to make sure you are going to get the best possible retirement plan for your current and future financial situation you should seek the help of a professional.

3. Annual Contribution Limits
As if income limits were not enough, Roth IRA is also going to shackle you with annual contribution limits. It might not be enough of a reason for you to stay away from it, but it is certainly a negative aspect of it. For a lot of people these small disadvantages all build up to a solid motive to stay away from Roth IRA and to choose another plan option.

4. Capping on Contribution
To finish off the cons of Roth IRA, you also have a capping on your contribution. Those who have a high income would find this capping on the contribution a serious problem with the Roth IRA and might prefer other options without this type of limitation.