Saving for retirement while you're young sounds absurd, especially when so many of us haven't even escaped from student debt. Yet starting early is, the experts point out, the best possible course for us in the long run. That brings on a whole new set of problems: Which retirement savings plan should you spring for?
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You've probably heard of things like the 401(k) and IRAs, even if they make your head swim. When it comes to individual retirement accounts, the Roth IRA may ring a bell. There's a lot to love about it, especially when it comes to taxes. What makes it special is that you bother with paying taxes when you first invest in it, so that later, when you withdraw from the account, what you see is what you get. This has a long-term effect of lowering your tax rate, if your net worth grows over time.
Some experts point out that's not the whole story, though. Several of them recently spoke to HuffPo about some major drawbacks to the Roth IRA. It may not be a bad option for you, but it is one worth understanding fully before you commit to it.
First, it will cost you more upfront, thanks to the way it interacts with the tax structure. It's also not clear that the tax benefits really outweigh a traditional IRA's. Finally, there's no way to tell what the financial climate will be by the time you're ready to withdraw. Read the whole article for a more thorough look at these potential downsides — but also talk to a professional if you're still not sure how to proceed.