We’ve talked before about IRAs and needing the right amount of money saved for retirement. However, there are other reasons to have an IRA, but especially a Roth IRA. Why a Roth IRA? Here are a few reasons: 

Compound interest- like other IRAs, Roths allow your money to grow with compound interest. This is important because there are…

No age limits- you can open a Roth IRA whether you’re 16 or 36; you just need earned income. The younger you open an account and start saving, the longer your balance grows with compound interest, which is a good thing for you.

TAX-FREE contribution withdrawals- this gives you flexibility for emergencies when you may need extra cash on hand. The catch here is that you can only withdraw contributions tax-free, not earnings. And while we don’t advocate spending money meant for retirement, it does work as a financial backstop.

Generally tax-free withdrawals in retirement- traditional IRAs tax retirement withdrawals in your top tax bracket, whereas Roth IRA withdrawals are mostly tax-free. Assuming tax rates will continue to rise in the future, it’s better to pay your taxes now than later.

It can help you buy a home- an added perk of Roth IRAs: once the account has been open for 5 years you can withdraw all contributions plus up to $10,000 in earnings penalty and tax-free to purchase your first home. Again, Lincoln Savings Bank isn’t big on dipping into retirement savings, but it’s nice to know that option is available.

Better contribution for flexibility- procrastinators rejoice! With Roth IRAs, you get a 16-month time period to contribute to the account. So, if you started funding a Roth IRA back in May of this year, you have up until Tax Day in April of 2014 to reach your $5,000 contribution limit for 2013, while 401(k)s and other retirement accounts end on Dec. 31.

More investment choices- most Roth IRA options have more investment options than a 401(k). This means you can create a more diversified portfolio for safer investing.

There’s no limit on your account growth- 401(k)s and traditional IRAs require you to begin minimum distributions at age 70 ½; with Roth IRAs you’re never forced to withdraw your money. If you don’t need your money, continue to let it grow until you do.

Roth IRAs can be passed on- account funds can be passed on to heirs after you die, which they receive annually or in a lump sum tax free. Traditional IRAs and 401(k)s can also be passed on, but their funds will be taxed.

While Roth IRAs tend to be better suited for younger workers, a Lincoln Savings Bank financial planner can help you decide which retirement option is best for you. Just give your nearest LSB branch a call to get started today!