Should you invest in a Roth IRA or a nonretirement account?

One of the benefits of a Roth IRA is that the money you invest in a Roth IRA grows tax-free, so you don’t have to worry about reporting investment earnings—the money your money makes—when you file your taxes. By comparison, if you invest in a nonretirement account, your earnings are subject to federal, state, and local taxes each year. 2.

Why should you invest in a Roth IRA?

Get tax-free growth potential, tax-free withdrawals, and even more. Contributions to a Roth IRA are made on an after-tax basis. You can withdraw your contributions at any time and any potential earnings can be withdrawn tax-free 1 in retirement. Contributing to a Roth IRA gives you tax flexibility in retirement.

Can I use a Roth IRA if my income is over the limits?

If your income (as measured by MAGI) is over the IRS limits, the only way you can take advantage of a Roth IRA is by converting money from an existing retirement account, such as a traditional IRA. 4 There is a cost, though.