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A Roth IRA can provide a beneficial long term plan which can not only help you save for retirement but also provide several benefits you dont know about.f. For example, did you know that a Roth IRA can also be an effective tool to save for your childrens’ college education? Or that a Roth can be a valuable part of your estate planning? When considering your options, be sure to look at things like investment choice — you’ll want a large selection of no-transaction-fee mutual funds and commission-exempt exchange-traded funds — account minimum, account fees and customer service. If you plan to trade stocks in your Roth IRA, you should also consider the online broker’s stock commissions.Follow the rules, and any money you put into one of these retirement-savings accounts grows absolutely tax exempt: You won’t owe Uncle Sam a dime as you let your savings accumulate, or when you cash out in retirement. Plus, an IRA is more flexible than a 401(k) and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate.If you haven’t yet opened this gift from Uncle Sam, do it now. You have until your tax return deadline to set up and make contributions for the previous tax year.

If you are eligible to invest in a Roth IRA, I think it is hands down the best retirement investment you can make.The advantages of a Roth, especially when it comes to taxes, may not be immediately apparent. When you invest in a Roth, you see, you get absolutely no tax break. There is no deduction for your contribution; in fact, you invest in a Roth with money that has already been taxed. But before you decide I am nuts to push Roths, stick with me for a few more minutes.Some of the benefits which an Roth IRA can provide include:

1. Tax diversification
Having some of your retirement money in pre-tax accounts and some in after-tax accounts adds tax diversification to your portfolio. “If you can do both, do both. You’re diversifying the tax characteristics of your retirement money,” says Neal Van Zutphen, a certified financial planner and president of Intrinsic Wealth Counsel in Mesa, Ariz. “When I’m in retirement, I may be able to manage my taxable income and still meet my retirement needs by only taking so much out of my traditional IRA and taking the rest out of my Roth IRA to keep me in the lowest tax bracket.” Whether or not your Social Security benefits will be taxable is dependent on your adjusted gross income and traditional IRA withdrawals—but not Roth IRA distributions—count as income.

2. Help reduce or even avoid the Medicare surtax.
A Roth IRA may potentially help limit your exposure to the Medicare surtax on net investment income. This is because qualified withdrawals from a Roth IRA don’t count toward the modified adjusted gross income (MAGI) threshold that determines the surtax. MRDs from traditional (i.e., pretax) accounts such as a workplace retirement plan—like a traditional 401(k)—or a traditional IRA, are included in MAGI and do count toward the MAGI threshold for the surtax. Depending on your income in retirement, MRDs could expose you to the Medicare surtax.

3. Use your contributions at any time.
A Roth IRA enables you to take out 100% of what you have contributed at any time and for any reason, with no taxes or penalties. Only earnings in the Roth IRA are subject to restrictions on withdrawals. Generally, withdrawals are considered to come from contributions first. Distributions from earnings—which can be taxable if the conditions are not met—begin only when all contributions have been withdrawn.

4. If you’re young, your income is likely to rise.
The younger you are, the more chance there is that your income will be higher when you retire. For instance, if you’re under age 30, it’s likely that your income and spending during retirement will be significantly higher than it is now, at the beginning of your career. And the greater the difference between your income now and your income in retirement, the more advantageous a Roth account can be.

5. If you’re older, you can continue to contribute as long as you work.
As long as you have earned compensation, whether it is a regular paycheck or 1099 income for contract work, you can contribute to a Roth IRA—no matter how old you are. There is no age requirement for contributions, as there is for a traditional IRA, where you cannot contribute if you are older than age 70½—even if you have earned income.

No matter what your age, because a Roth IRA may improve your tax picture, it makes sense to take the time to learn how a Roth works and see whether you would benefit from one, notes Hevert. The key is to discuss your situation with a tax or financial adviser to help you fully assess your situation.

Where should you open an IRA?

You can open an IRA through almost any large financial institution, including banks, mutual fund companies and brokerage firms. Most IRA providers offer a broad variety of investment options, ranging from CDs to money market funds to mutual funds to individual stocks and bonds, so you can put together a diversified retirement portfolio within your IRA no matter which one you choose.
How do my IRA withdrawals get taxed in retirement?

Your withdrawals from a Roth IRA are tax exempt as long as you are 59 ½ or older and your account is at least five years old. Withdrawals from traditional IRAs are taxed as regular income, based on your tax bracket for the year in which you make the withdrawal.
Should you take money from my IRA to pay off debt

Taking withdrawals from an IRA before you’re retired is something you should do only as a last resort. There are a few reasons why.
If you withdraw money from a traditional IRA before you turn 59 ½, you must pay a 10% tax penalty (with a few exceptions), in addition to regular income taxes. Plus, the IRA withdrawal would be taxed as regular income, and could possibly propel you into a higher tax bracket, costing you even more.

Though the feds allow you to withdraw contributions from a Roth IRA without incurring a penalty, you will owe a penalty (and taxes) if you withdraw the earnings on those contributions.