In our last post we talked about the importance of saving enough in your employer sponsored retirement plan and cautioned that even if you were contributing your full match, it might not be enough. The vast majority of us will need additional savings and a good place to accumulate that is in a Roth IRA.  A Roth IRA is an excellent savings vehicle because, unlike the traditional IRA, the money in a Roth grows tax free and the withdrawals are not taxed either.  This makes it preferable to the traditional IRA for retirement savings, but there are other advantages to a Roth IRA as well. Here are four reasons you should save money in a Roth IRA: The Roth IRA gives much more freedom of choice.  In an effort to keep the plan simple, many 401(k) and 403(b) plans do not include investment choices that would help diversify your portfolio, nor do they offer the most cost-effective investments available.  Most employer plans limit you to investing in only a handful of mutual funds.  While mutual funds are good investment vehicles, ETFs (Exchange Traded Funds) have emerged as a favorable alternative to mutual funds because of their lower cost and flexibility.  In a portfolio that is large enough to accommodate them, individual stock holdings are also a good choice for low expense and diversification. The money in a Roth IRA that is not inherited is not subject to a Required Minimum Distribution (RMD).  Roth IRAs are funded with after-tax money and the withdrawals from a Roth are not taxed on the way out. Because of this, the IRS has no need to force withdrawals from a Roth because there are no taxes to collect.  Not being subject to an RMD makes the Roth IRA a more flexible option for retirement income.  You can also continue to contribute to your Roth after the RMD mandatory age of 70½ if you are still… | Read More »