A Roth individual
retirement arrangement (Roth IRA) allows tax payers, subject to
certain income limits, to save money for use in retirement while
allowing the savings to grow tax-free. All of the tax benefits
associated with a Roth IRA happen when withdrawals are made:
withdrawals, subject to certain rules, are not taxed at all.
(This is in sharp contrast to a traditional IRA.) Stated
differently, Roth IRAs convert investment income (dividends,
interest, capital gains) into tax-free income. There are no tax
benefits associated with contributions (no deductions on your
federal tax return) because all contributions to a Roth IRA are
made with after-tax monies.
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