Roth individual retirement accounts (usually known as Roth IRAs) are considered one of the best retirement plans and long-term investment accounts anyone can have. Because they are funded with after-tax dollars, you can withdraw your funds in retirement (after age 59½) tax-free. Roth IRAs can hold almost any financial asset except life insurance and collectibles, which makes them versatile for diversified investing.

A Roth IRA can be an excellent tool for growing your nest egg, especiallyꦓ if you understand the do’s and don’ts of investing for these accounts. Here’s a quick look at managing your Roth IRA to ma♛ke the most of it.

Unlike traditional IRAs, Roths have no 澳洲幸运5开奖号码历史查询:required minimum d🐷istr⛦ibutions (RMDs) during the owner’s lifetime. This means you don’t have to withdraw the annual minimum amount once you reach age 73, as required by traditional IRAs. Instead, you can leave the money to grow tax-free 澳洲幸运5开奖号码历史查询:for your heirs."

You can contribute up to $7,000 ($8,000 if you’re age 50 or older) a year to your IRA(s) in 2024 and 2025. You can withdraw your contributions anytime (for any reason) without incurring taxes or penalties. However, to 澳洲幸运5开奖号码历史查询:withdraw any accumulated earnings without facing taxes or penalties, you must be at least age 59½ and the IRA must have been open for at least 澳洲幸运5开奖号码历史查询:five years, unless you qualify for an 澳洲幸运5开奖号码历史查询:exemption.

Roth IRA vs. Traditional IRA

澳洲幸运5开奖号码历史查询:Created in 1997, a Roth IRA is the younger sibling of traditional 澳洲幸运5开奖号码历史查询:iꩲndividual retirement accounts (IRAs). The most significant difference between these two IRAs is how they’re taxed. Roth IRAs are funded with 澳洲幸运5开奖号码历史查询:after-tax dollars, meaning that contributions aren't tax-deductible. But once you start withdrawing funds in retirement, the money is tax-free.

Conversely, 澳洲幸运5开奖号码历史查询:traditional IRA contributions are usually made with pretax dollars. You can deduct your contributions (depending on your income and other factors), but you pay income tax on withdrawals during retirement.

Popular Roth IRA Investments

Roth IRAs can hold just about 澳洲幸运5开奖号码历史查询:any financial asset except life insurance and collectibles; however, the “big-box” IRA companies (for example, 澳洲幸运5开奖号码历史查询:Charles Schwab, Fidelity, and Vanguard) typically stick to the assets that they sell (and make money from)—such as stocks, bonds, and mutual funds. To access 澳洲幸运5开奖号码历史查询:non-traditional assets such as real estate and precious metals, you'll need a 澳洲幸运5开奖号码历史查询:custodian who offers a special account called a 澳洲幸运5开奖号码历史查询:self-directed IRA (SDIRA).

Here’s a rundown of some of the more popular investments for sta💖ndard🌼 (in other words, not self-directed) Roth IRAs:

• Stocks: 澳洲幸运5开奖号码历史查询:income-oriented stocks that pay high dividends or growth stocks that can yield high returns.
• Bonds: interest-paying 澳洲幸运5开奖号码历史查询:debt instruments offered by the U.S. government, states, municipalities, and corporations.
• Mutual funds: professionally 澳洲幸运5开奖号码历史查询:managed investment funds that can offer simplicity, low expenses, and diversification.
• Exchange-traded funds (ETFs): 澳洲幸运5开奖号码历史查询:baskets of securities that trade like individual stocks, offering diversification, low expenses, and high potential yields.
• Target-date funds (TDFs): a diversified mix of equities and fixed-income investments that 澳洲幸运5开奖号码历史查询:automatically rebalances as you get closer to retirement.
• Real estate investment trusts (REITs): companies that own, operate, or finance income🌊-producing real estate and pay dividends to investors.

Prohibited IRA Investments

There are a handful of investments that you can’t hold in a Roth IRA:

• Life insurance
• 澳洲幸运5开奖号码历史查询:Collectibles, including art, rugs, metals, antiques, gems, stamps, most coins, alcoholic beverages, and other tangible personal property

According to the 澳洲幸运5开奖号码历史查询:Internal Revenue Service (IRS), if you invest your IRA in a collectible, the amount invested is considered distributed in the year the item is acquired. You would owe income tax on the earnings from the distribution, and if you are under 59½, a 10% early withdrawal penalty may🔴 also apply.

Prohibited Roth IRA Transactions

A prohibited transaction in a Roth or traditional IRA is any improper account use by the owner, their beneficiary, or any disqualified person, including the owner’s 澳洲幸运5开奖号码历史查询:fiduciary or family members. The IRS strictly prohibits the following transactions in IRAs:

• 澳洲幸运5开奖号码历史查询:Borrowing money from an IRA
• Selling property to an IRA
• Using an IRA as security for a loan
• Buying property for personal use with IRA funds

Margin Accounts and Roth IRAs

澳洲幸运5开奖号码历史查询:Margin accounts are brokerage accounts that let you borrow money from your brokerage firm to buy securities. The 澳洲幸运5开奖号码历史查询:broker charges interest, and the securities are used as collateral. Margins let you buy more securities with less of your own cash, magnifying both gains and losses.

Because the IRS prohibits using an IRA as security for a loan, you generally can’t use a margin to trade with an IRA. If you do, the IRS could t𒁃reat the amount as a distribution🐎, and you’ll owe income tax on the earnings. If you’re under 59½, a 10% penalty may also apply to the full amount.

Still, some brokers allow something known as “limited margin,” which is like getting a 澳洲幸运5开奖号码历史查询:cash advance on the securities that you sell. For example, if you sell a stock in your IRA, there could be a delay between the trade’s execution and receiving the cash in your account. If you have a limited margin account, you could make another trade while waiting for the previous trade to settle—the stock sale in our example. This means you can manage the investments in the account quicker and more readily.

Limited margin is available for most IRA types, including the Roth, traditional, Simplified Employee Pension (SEP🧜), and Savings 🌃Incentive Match Plan for Employees (SIMPLE) varieties. Brokers that allow limited margin for IRAs have specific eligibility requ🍃irements (e.g., a minimum balance), and your account must be approved for this type of margi🍷n before placing any trades.

Roth IRA Withdrawals

In general terms, 澳洲幸运5开奖号码历史查询:withdrawal rules for Roth IRAs are more flexible than for💮 traditional IRAs and 401(k)s.

Roth IRA withdrawal rules differ depending on whether you take out your 澳洲幸运5开奖号码历史查询:contributions or your investment income. Contributions are money you deposit into an IRA, while income and earnings are your profits. Both grow tax-free in your account.

• Withdrawing contributions: You can withdraw your Roth IRA contributions at any time, for any reason, with no tax or penalties. That’s because contributions are funded with after-tax dollars, so you’ve already paid income taxes on that money.
  
• Withdrawing earnings: If you 澳洲幸运5开奖号码历史查询:withdraw IRA earnings, you may be subject to income taxes and a 10% penalty, depending on your age and how long you’ve had the account.  
  

In general, you can withdraw your earnings with no taxes or penalties if:

• You’re at least 59½ years old.
• It has been at least five years since you first contributed to any Roth IRA. This is called the 澳洲幸运5开奖号码历史查询:five-year rule.

The Bottom Line

Roth IRAs are a popular way to save for retirement due to their tax advantages and lack of RMDs. While many investors stick to stocks, bonds, and mutual funds in their Roth IRAs, investing in non-traditional assets like real estate and 澳洲幸运5开奖号码历史查询:cryptocurrency is possible 澳洲幸运5开奖号码历史查询:if you have an SDIRA. 

Of course, keep in mind that alternative investments have greater earnings potential but more risk, too. As such, SDIRAs are generally b🅘est suited for investors who already have substantial experience buying and selling non-traditional assets and understand the tax implications and potential volatility of those investments.