Chicago — Young adults who have a hard time envisioning retirement might want to look into setting up a Roth individual retirement account.
Standard retirement accounts don’t let individuals take funds out until they’re nearly 60, when they could do so without facing early withdrawal fees. Roth IRA accounts allow individuals to always access the money they contributed without penalty and no matter their age, since contributions are made after-tax. However gains in the account may be subject to taxes and penalties if withdrawn before age 59 and a half unless an exception is met, an advisor told CNBC.
Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, views Roth IRA’s as a dual purpose account.
“They can use the Roth IRA to save for retirement, but also in case of emergency, they could take the money out,” she said.
“The fact that a Roth gives you liquidity on your contribution amount makes [access] a non-issue,” said Sun. “And I’d say 99% of my clients have never needed to take from their Roth IRA ... they take a lot of pride in having it.”
Roth IRAs also don’t come with required withdrawal that must be made by qualifying retirement accounts at age 73. Additionally, if you pass on a Roth IRA when you die, your beneficiary gets to continue those tax-free withdrawals, though they may only have a decade to deplete the account.