Suze Ormanwell-known financial advisor and author, is a strong advocate of Roth retirement accounts, including Roth 401(k) and Roth IRA. According to Orman, these accounts offer substantial advantages over traditional retirement savings options because of their unique tax advantages and flexibility.
Suze Orman advocates for Roth retirement accounts, as outlined in her book “The Ultimate Retirement Guide For 50 Plus.” She highlights the benefits of Roth accounts: “In my opinion, you should absolutely put every penny into the Roth version of your retirement account. » Roth accounts offer tax advantages, in which contributions grow tax-free and withdrawals are also not taxed. This improves the retirement fund compared to traditional taxed accounts.
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Orman highlights the uncertainty of future federal income tax rates. On her website, she warns: “If you’re not saving for retirement in a Roth, I think there’s a good chance you’re making a mistake.”
The benefits of Roth accounts go beyond their favorable tax treatment. Orman highlights their flexibility, particularly in estate planning and inheritance strategies. “If you plan to leave your retirement savings as an inheritance, a Roth 401(k) is also best here,” says Orman. Heirs can inherit Roth accounts without having to pay income taxes, which can be a significant advantage if they are in a higher tax bracket.
Despite the obvious benefits, not everyone has access to a Roth 401(k) through their employer. In these cases, Orman recommends the Roth IRA as an alternative. The Roth IRA offers similar benefits to the Roth 401(k), but with income limits for eligibility.
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Moreover, Orman advises those who have access to employer-sponsored retirement plans to get the most out of them. “If you have a retirement account at work that matches your contribution, invest up to the match point. After that, fully fund your Roth IRA,” she suggests. This allows individuals to benefit from the employer contributions and tax advantages of Roth IRAs.
Orman likes the flexibility of penalty-free withdrawals from Roth IRAs. Contributors can withdraw their contributions (but not their earnings) at any time without penalty, regardless of their age or the duration of the funds. This feature is especially great for those who may need to access their funds before retirement due to unforeseen circumstances.
Overall, Orman’s recommendation to prioritize Roth accounts when planning for retirement reflects his strategic approach to maximizing financial security. By understanding the distinct benefits of Roth 401(k)s and Roth IRAs, individuals can make informed decisions that improve their financial well-being in retirement while providing flexible options for their heirs.
Although Orman’s advice is generally sound, it is important to consult a…
