The sweetest thing about the Roth IRA is you’ve already paid income taxes on the money, so when you retire you will begin taking withdraws tax free.

Your future self is going to be ecstatic that you made the decision 30 years prior to start a Roth IRA.

Let’s break this down.

When will you put money into a Roth IRA? The answer is, before retirement and ideally when you are younger.

When will you use the money in the account? In retirement. And guess what? It will be tax free. Whhhhaaaatttttt.

Okay, so you know how when you do income taxes you get your W2 from your employer and you put those numbers into Turbo Tax or other tax software? You see all those numbers of federal income tax, medicare, state tax, etc., that you’ve paid over the course of 12 months. Right. You’ve been paying income taxes from your paychecks and then your annual income taxes are a sort of “balance” to make sure you actually paid enough taxes, or too much!

Taxes won’t stop in retirement. Hate to break it to you.

In retirement, your 401k (let’s hope you’ll have one) will be sitting there. You’ll start to “withdraw” your money which basically means you’ll be paying yourself a paycheck from your retirement account into your bank account, so you can pay for…life.

The money you take out from your 401k will be taxed, very similar to how you are taxed now on your paycheck from your employer (except you might have a different tax bracket than you have now).

NOW here comes the Roth IRA to save the day.

Remember how I said you’ve already paid taxes on your Roth IRA money? Right. So in retirement you’ll pay yourself a “paycheck” from your Roth IRA, just like the 401k, but you won’t pay income taxes on it.

BAM. Send in the trumpets. That’s the beauty of a Roth IRA. When you are old and flush with cash, you’ll be able to say that you actually did something smart as a young fool!