LaTishaJoy
Jan 4 2001, 02:50 PM
What is the tax benefit of opening up a ROTH IRA and would investing 4000 vs 2000 make a difference by Apr 16?
Michael Devault
Jan 4 2001, 05:44 PM
The main tax benefit of a Roth IRA is that the interest earned by the Roth IRA can eventually be taken out income tax free. This is a unique feature, since most other alternative methods of saving money require you to pay taxes on interest earnings.
If you contribute $4,000 now, it would cover your contribution for 2000 and 2001. The advantage of making your 2001 contribution now is the extra time to earn interest on it. Over a number of years, compounding of this interest can make quite a significant difference in your account.
Hope this helps. Good luck to you!