Roth IRAs for Crypto: Long-term Investment Strategy
Roth IRA is an investment option if your retirement taxes are expected to be higher than they are now.
What are Roth IRAs?
Roth IRAs are similar to traditional IRAs, so let’s look at them first. Traditional IRAs are individual retirement accounts that allow individuals to make pre-tax contributions to a retirement account, where investments grow tax-deferred until they are withdrawn during retirement. At retirement, withdrawn funds are taxed at the IRA owner’s current income tax rate. The main difference between Roth IRAs is the way they are taxed.
Roth IRAs are funded from after-tax funds, and contributions are not taxed. However, when you start withdrawing funds, they are not taxed. Traditional IRAs are funded from pre-tax funds, and you generally get a tax education on your contribution and end up paying income tax when you withdraw money from the account throughout retirement.
Today, the limit for singles is $140,000 and $208,000 for married couples. Keep in mind that the amount you can contribute changes periodically, and in 2021 the contribution limit will be $6,000 per year if you are under age 50, where it will increase to $7,000. The Roth IRA offer can be offered by all brokerage firms, physical or online, and most banks and investment firms will also give you this option.