Roth IRA
Categories: Tax, Trusts and Estates, Insurance
It's a retirement package that taxes you for investments when you invest 'em.
Example
Say it's 2019, and you make a contribution of $2,000. You're taxed at the 50% marginal rate, so you had to earn $4k to keep that $2k. But at least you have that $2k. You then invest it in your Roth IRA and it compounds at 10% a year in an index fund. You take it out 22 years later and it has doubled 3 times—that is, it became worth $4k in 7.2 years, then $8k in another 7.2 years then $16k in another 7.2 years—at which time you retire and want the dough for the cruise to Boca.
You take out the $16k—untaxed. You got to compound all those years with no tax paid on the gains. In a normal IRA, you'd be taxed on those gains.
Roth Love.