#1 Roth IRAs and Roth 401(k)s
No matter what type of Roth account you choose, they generally come with long-term advantages when it comes to taxes. Despite the fact that you cannot list the contributions as deductions when you start making withdrawals from your Roth accounts, these will be tax-free.
Yet, you cannot start cheering for the two Roth accounts just yet.
They remained tax-free only in certain circumstances; if we are talking about the Roth IRA, you have to wait five years before you can start making tax-free withdrawals. The good news is that the five-year clock starts when you first deposit money into the account, no matter if you are opening a Roth one or transforming your traditional IRA into a Roth IRA. The second stipulation is that you must be older than 59 and a half years old to avoid paying 10% in withdrawal penalties!
For Roth 401(k)s, the rules and caveats are somewhat similar: contributions aren’t deductible, but all withdrawals are tax-free, with a five-year waiting period. The timer, on the other hand, begins on January 1st of the year you first opened and contributed to the account and ends after five years!
In general, if you opened it when you were young, you would not have begun your retirement life when you began making withdrawals! So, when retirement comes around, you can safely make any withdrawals!
