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How to Build Long Term Wealth with Your Roth IRA Tax Free

Some investments are more likely to help you build long-term wealth with your Roth IRA than others. This tax-free investment vehicle is a great way to build wealth and set yourself up for a comfortable and exciting retirement. Using tax-free investments like a Roth IRA is definitely smart way to build wealth consistently and effectively without having to scramble to make huge amounts of money entering your golden years because you haven’t prepared early enough.

Generally speaking, if you are going to fund your Roth IRA you should definitely do so with the right investments that will help you build long-term wealth. Some areas to consider include:

  • Investments with high growth potential including individual stocks. Certain stocks are going to grow rapidly in value which will definitely help you increase your wealth substantially.
  • Investments with generous dividend payments. REITs are certainly an excellent option and something you should definitely invest in. Other dividend paying stocks should be added to your portfolio so you can generate regular income throughout the year.
  • Investments that have high levels of turnover. In this case, we are speaking directly about actively managed mutual funds. When a mutual fund is actively managed, it means the manager is moving in and out of stocks to provide investors with the best returns on their investment.

The Advantages of a Roth IRA

In a Roth IRA as well as a traditional one, as long as you keep the money in the account, any growth earned through investments is not taxed. Once you begin taking distributions after reaching retirement age is when taxes will become an issue.

Some things to consider include:

  • Traditional IRA withdrawals are taxed at the account holder’s rate of income tax. So once you reach this point, you’ll have to pay taxes on your earnings and the original contributions that you’ve made.
  • With a Roth IRA, you are funding your account with money that was already taxed before you invested it into this account. But here’s the beauty of this investment vehicle, because once you start withdrawing money you’re in a much stronger position because you do not have to pay taxes on the money you used to fund the account because you paid them already. Plus you aren’t going to have to pay taxes on any earnings because the IRS considers your account with them already settled.

Other Benefits of a Roth IRA

Retirement

Believe it or not, there are other reasons to choose a Roth IRA besides the incredible tax advantages. Investment tax characteristics are another major reason. If you generate income with specific investments – in this case municipal bond dividends – the dividends are not going to be subjected to federal taxes.

REITs dividends, on the other hand, are still subjected to taxes by the IRS. But these dividends are generous and they are definitely a good investment for your Roth IRA, so keep that in mind.

You can read more about IRA Investing at https://www.IraInvesting.com.

Final Thoughts

As you can see, investing in a Roth IRA is definitely a smart way to generate wealth using this tax-free investment vehicle. The earlier you start, the wealthier you’ll be, so begin funding your Roth IRA as soon as possible to ensure a happy and comfortable retirement in the future.

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