Roth IRA

Adding a Roth IRA to Your Portfolio

The Roth IRA was first introduced in 1998. If you meet certain conditions then the Roth IRA provides something that is not available through any other retirement investments – the ability to withdraw all the earnings of the fund tax free. This incredible feature comes with a price – you do not get any tax relief for contributions but you will save significantly when you withdraw the capital and the earnings later on in life.

Whether having up front tax relief is more important to you or tax relief on your withdrawal is more important is something that will be determined by your financial situation. Although all things considered, it is far better to have tax relief on earnings since over a long period of time your contributions can grow substantially and you will have to pay much more in taxes on your earnings than you would on your contributions.

A Roth IRA will definitely play a role in any successful investment strategy. A Roth IRA should not be your only investment vehicle in planning your financial future but it is a very important part of it. Along with a Roth IRA you should also count stocks, mutual funds, bonds and guaranteed investment certificates as part of a properly balanced financial portfolio. The reason behind balancing your investments is simple – when stocks are on a down turn then your bonds and guaranteed investment certificates will ensure the stability of your investments. A well balanced portfolio is essential for any retirement investment plan to succeed.

Using the tax benefits and shelters offered by the different kinds of retirement funds on the market definitely form part of a sound investment strategy. These shelters are there for our benefit and it would be a shame not to use them to our advantage. If you do not know which retirement tax shelters are best suited to your situation then the best thing you could do is consult an investment advisor who will be able to guide you in the right direction and help you set up a portfolio that will give you peace and mind and security in your old age.