When you take a look at your nest egg, can you genuinely say that you’re happy with where your money is going? You spend so much time nurturing that little egg – it may be worth another look.
Many Americans who’ve taken another glance at their nest eggs have decided that it’s best to make a change. Specifically, data from the Internal Revenue Service shows that people are turning to Roth IRAs as opposed to taking the traditional route. Since 2010, the number of Americans who have converted has increased nine fold.
But why? Is there a benefit to doing so?
Wealthy Americans love the idea of Roth IRAs because they were previously ineligible for them – a $100,000 annual income cap had kept them from away from this option in the past. However, the advantages that come with converting are equal to everyone.
If you choose to go with a Roth IRA, you will pay the taxes for your investments up front rather than later. With a traditional IRA, you’ll pay your taxes as ordinary income when you start withdrawing. Regardless of how wealthy you are, these are the two options available to you.
It’s worth noting that with a Roth IRA, you can withdraw from your account before you reach the age of 59 ½, which is a type of flexibility that some people enjoy. However, it appears that not everyone is sold on this alternative to the traditional IRA.
The financial institution Fidelity told Reuters that while 42 percent of the plans it administers offer Roth options, only 6.6 percent of people take advantage of it. Would it be hard to believe that there may be a lack of education pertaining to Roth investments? In any case, it’s worth considering in terms of your own nest egg and your golden years.
