How 8 Types of Retirement Income Get Taxed

Roth IRAs

Roth IRAs work in the complete opposite way. When you contribute money it’ll still be subject to taxes. If you prefer not to pay taxes on withdrawals, then opening a Roth IRA is the way to go.

You might be wondering why more people don’t open up such accounts. Maybe it has something to do with these two crucial caveats. First, you can only take tax-free withdrawals five years after you opened your account. Secondly, you will be subject to a 10% penalty if you wish to withdraw any money before the age of 59½.

If you’re certain you can avoid these fees and that you won’t need to touch your savings for the next 5 years, we advise you to open up an account in order to diversify your retirement income.

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