retirement

6 advantages of Roth IRAs

Reason No. 1: You get tax-free income in retirement
Reason No. 1: You get tax-free income in retirement © maxstockphoto/Shutterstock.com

With Roth IRAs, savers get a tax-free stream of income in retirement. And it's not just the contributions that come out tax-free. Uncle Sam doesn't lay a finger on any of the earnings. It can be a pretty sweet deal when you're talking about decades of compounding.

The only catch is that you pay income tax on your contributions upfront.

Unlike the traditional IRA, which gives investors a tax deduction for the year the contribution is made, the Roth version lets savers contribute after-tax money today and withdraw principal and earnings tax-free at retirement.

"For individuals looking for tax diversification in retirement, the Roth IRA is one of the few buckets they can create that ensures that they have a stream of tax-free income in retirement," says Ken Hevert, vice president of personal and small business retirement products at Fidelity Investments.

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