Roth IRAs are a fantastic investment option for most people. One of the most significant benefits of a Roth IRA is that your capital gains are tax-free, even though your contributions are not tax-deductible. Another great advantage is that you can withdraw your contributions at any time without penalty since you've already paid taxes on that money.

Here are seven additional interesting tidbits you might not know about:

1. You can use a Roth IRA to buy a house.

If you're a first-time homebuyer, you can take up to $10,000 from your Roth IRA earnings to put towards your home.

  • However, it's important to be aware of the long-term costs of taking money out of your Roth IRA. At 10.5% interest, that $10,000 is worth over $155k in 25 years, so it might be best to find another source of funds if possible.

2. Not everyone can get a Roth IRA.

There are income limits, and for 2022, if you're single and make more than $144,000, you cannot contribute to a Roth IRA. That number jumps to $153,000 for 2023.  Likewise, if you're married and filing jointly, the income limit for 2022 is $214,000 and increases to $228,000 for 2023.

3. Dividends on investments in your Roth IRA are not taxed.

This might not seem like a big deal, but it can really add up over the decades, especially if you own a lot of dividend-paying stock.

4. You can contribute to your Roth IRA before tax day and claim it for the previous year.

This means you can still make a contribution for the previous year even if you were short on funds.

  • If you hurry up and get your taxes done early, you could take your refund and apply it to your Roth IRA and claim the contribution for last year, but you might have to re-file your taxes. Talk to your accountant about it.

5. Your Roth IRA can outlast you.

If you or your spouse happens to die, the two accounts can be combined without any penalty. It's also inheritable, and with some planning, it's a great way to pass money along after your death.

6. Your spouse doesn't have to work to have a Roth IRA.

Many people believe that you have to be working to contribute to a Roth IRA, but that's not true. Contributing to your spouse's retirement, as well as your own, is beneficial to both of you.

 

All in all, Roth IRAs are excellent investment vehicles if your income is within the limit. The ability to avoid paying taxes on earnings will make your high-income friends jealous. Roth IRAs have several interesting features that really enhance their utility, making them a superior choice over traditional IRAs for nearly anyone that has the option of choosing. So why not check out a Roth IRA and see if it makes sense for you?