"Even small optimizations can become meaningful. Assuming a $5,000 initial investment and annual $5,000 contributions for 25 years, the difference in improving your IRR just 1% and going from 8% to 9% annual returns results in nearly $67,000 more in your retirement account. So it's worth spending a little extra time to make sure you're getting the most out of your Roth IRA by understanding all the various benefits and strategies."
"You can even do something called a self-directed Roth IRA which allows you to own income producing real estate directly in a Roth account, but this is more involved. In a taxable brokerage account, dividends and interest are taxed every year, either at ordinary income rates or at the qualified dividend rate, which can be as high as 20% depending on your bracket. Inside a Roth, however, that "tax drag" disappears."
The Roth IRA is a widely held U.S. retirement account with an estimated 34.6 million Roth accounts, behind traditional IRAs and 401(k)s. Small optimizations compound: a one percentage point increase in annual returns raises a modeled 25-year balance by nearly $67,000 on the example shown. Income-producing assets such as dividend-paying stocks, bond funds, and REITs should be held in Roth IRAs to eliminate annual tax drag on dividends and interest. Self-directed Roth IRAs can hold income-producing real estate directly. In taxable brokerage accounts, dividends and interest are taxed yearly at ordinary or qualified rates, sometimes up to 20%.
Read at 24/7 Wall St.
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