The big advantage of contributing to a Roth IRA is that the earnings are tax free. There are a few requirements, but when money is withdrawn from a Roth account, no taxes need to be paid (taxes were paid on the income before it was invested in the Roth, however). This benefits older workers, who can essentially reposition savings from a taxable environment to a place where earnings will be tax-free. However, if you are an older worker who is behind on retirement savings or is in a lower tax bracket, a Roth IRA may not be advantageous.
Key Takeaways:
- Roth IRAs are a great way to grow tax-free assets, and have catch-up mechanisms for people over 59 and 1/2.
- Roth IRAs can be used by anyone making income under a specific threshold, at any age.
- Older workers in lower income brackets may have better options than Roth IRAs to save more.
“Other options, like Roth IRAs and employer sponsored retirement plans, are available to older workers, regardless of age.”
