No, a Roth is not some crazy form of a bug from a tropical forest. It’s a type of retirement account, much like a traditional IRA, with a few major differences. Roth’s are really popular with millennials, and for good reason.
With a traditional IRA, you are given a tax deduction for your contributions as you go along. When you take your money out when you retire, then you are taxed. Being taxed later on when your account is very large can be a negative occurrence for many people. A Roth works in the opposite way. You have no immediate tax deduction, but when you take the money out when you retire, you aren’t taxed. So, you are taxed now on a small amount, and not taxed later on a much larger amount. Sounds good, right?
With both you get to invest in Mutual Funds, stocks, bonds, ETF’s and all the same goodies. So for that purpose, they work very similar, like brother and sister.
There are a few catches for why you might not choose a ROTH, so check out the podcast for all the details. As with any retirement or investment account, you need to find what works for you and your individual situation. For those where it works, a Roth is a great addition to any financial plan.