Personal finance expert Suze Orman has some strong words for Americans looking to eventually retire: Put as much money as you can into a Roth IRA.
A Roth IRA is a type of individual retirement account where you contribute after-tax dollars from your paycheck and, as money genius Orman points out, all future withdrawals are tax-free.
This means much more financial freedom than other retirement plans, including a 401(k), offer.
Those types of accounts are funded with pre-tax money, he adds, so all your money will have a chance to compound.
In a time where every penny counts, advice is more than welcome and can give your money a much-needed boost.
A leading personal finance expert has some strong words for Americans looking to eventually retire: Put as much money as you can into a Roth IRA. Pictured: A hypothetical illustration of a 4 percent annual retirement plan return after inflation.
“If you’re not saving for retirement in a Roth, I think there’s a good chance you’re making a mistake,” former CNBC host Suze Orman told Benzinga on Tuesday, promoting the specific type of retirement account.
“If you’re not saving for retirement in a Roth, I think there’s a good chance you’re making a mistake,” the former CNBC host said. Benzinga Tuesday.
“If you plan to leave your retirement savings as an inheritance, a Roth 401(k) is better here, too,” he continued, explaining how the benefits of a Roth extend far beyond its favorable tax treatment.
To this end, its flexibility stands out, especially in the field of estate planning and succession strategy.
“If you have a retirement account at work that matches your contribution, invest up to the point of matching,” he further advised, asking those who have access to employer-sponsored retirement plans to take advantage of them.
“After that, fully fund your Roth IRA.”
In terms of inheritance, heirs can inherit Roth accounts without the burden of income taxes, he said; This is not the case with cash or inheritances, of which Uncle Sam will always receive a portion.
This can be a significant advantage for those in a higher tax bracket, Orman said, as he explains to Americans how to protect the wealth they worked so hard to accumulate.
For the less fortunate, there are no tax benefits for the current year, so your contributions, no matter how small, can grow tax-free.
As for why he supports Roth IRAs over other alternatives, he points to its flexibility, particularly in the areas of estate planning and succession strategy.
This can be done once the account has been open for five years, or after the account owner turns 59½, Orman denied, while repeatedly touting the flexibility of Roth’s penalty-free withdrawals.
A Roth 401(k), which is only available through certain employers, is even better, he said.
The main difference between a Roth and a traditional 401(k) is when taxes are applied, he added, detailing how in a traditional 401(k), contributions are made before taxes, while in a Roth 401(k), contributions are taxed. in the front.
But for those who don’t have access to that opportunity, a Roth IRA will certainly suffice, he said, citing how cContributors can withdraw their contributions at any time without penalty, regardless of their age or the duration of the funds.
This feature is particularly attractive to those who may need access to their funds before retirement due to unforeseen circumstances, although they will have to wait until they are 59 years old.
Despite the clear advantages, it is important to consult with a financial advisor to determine the best savings strategy for your specific situation, which depends on your tax bracket, your ability to take financial risks, and your goals after retirement.
Orman offered the advice a decade after her successful host of The Suze Orman Show went off the air after 14 years. He has since founded SecureSave, a company whose sole goal is to increase the US savings rate.
A financial advisor can consider all of these things, Orman said, a decade after her hit TV host went off the air after 14 years.
At the time considered one of America’s most visible personal finance gurus, she planned to develop a new series for Warner Bros. Telepictures Productions that would premiere in 2016, but it was never produced.
In 2020, he co-founded SecureSave, a company whose sole purpose is to change the savings rate in the United States.
He now works tirelessly to provide emergency savings plans tailored to American workers, depending on their situation.
