When considering yearly income taxes, many enjoy the benefits of a traditional IRA or any pretax retirement account, largely because they are able to deduct the contribution on their tax return. This is part of a strategy used to secure a lower tax bracket. However, investors that self-direct often enjoy large gains making the Roth IRA their #1 choice – and for a very good reason.
When you contribute to a Roth, you pay taxes up front. You might be asking yourself, “What’s so great about paying taxes up front when you can’t deduct your contribution from your taxable income that year?” Well, when you pay the IRS up front, that’s it, they don’t get anything else. Yes, it’s true. That means no capital gains tax, and no forced distribution at any age. You can buy and sell stocks, bonds, real estate, crypto currency, precious metals, etc. all inside your Roth IRA. This leads to increasing your wealth, year after year, without owing any additional taxes.
Let that sink in for a second.