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Roth IRA an Excellent Emergency Fund

By JOEL FRANK
Posted 4/27/20

Investing in a pre-tax/traditional IRA means you pay no tax on the contributions. Future withdrawals from the account will be subject to income tax at ordinary rates, even though the withdrawal will consist of contributions and earnings/profits those contributions generated. The more-favorable capital gains rates to not apply to the earnings portion of the withdrawal.

With that said, investing in an after-tax Roth IRA means you pay income tax, at ordinary rates, on the contributions, and if the account has been opened for at least five years and you have attained age 59.5, the earnings portion of the withdrawal is tax-free.

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