The Power Of The Roth IRA [Infographic]

The Roth IRA has only existed since January 1st, 1998 after congress passed the Taxpayer Relief Act of 1997. It was intended to provide tax payers with an alternative way to invest for their retirement. There are some key factors that make it a much more attractive option than the Traditional IRA. Today’s infographic does a great job at focusing on the power of a Roth IRA.

I love this infographic for its lack of information. Normally, that statement wouldn’t make sense but in this case, using beer instead of dollars is more effective at capturing the reader’s attention.

While this infographic illustrates how powerful a Roth IRA can be, it doesn’t say why – that’s my job. The great feature of a Roth is that you can withdraw the money tax free when you’re eligible to do so upon turning 59.5. The money deposited is considered post tax because you are not able to claim that deduction on your taxes . It doesn’t matter if you’ve made 500% or even lost money, you will not be taxed again.

When choosing between a Roth and Traditional IRA, you need to know what the pros and cons are.

Roth IRA advantages

  • You can take out your contributions at any time without penalties or taxes. The IRS has already taken their share. There won’t even be a penalty when only taking out your contributions. Make sure you don’t tough your gain as this money is treated differently.
  • There are no required minimum distributions so the assets can be passed down to your heirs. Assets in a Traditional IRA must be withdrawn over time after reaching 70.5 years old. Again, taxes have already been paid, so the IRS is not concerned about collecting their share before you die. Traditional IRA contributions are tax exempt, so the IRS wants to make sure they receive their taxes before your death. Theoretically, Roth IRAs can be passed down for hundreds of years, allowing that money to continue growing tax free. Of course, tax laws can always be changed.


  • Your contributions are not tax deductible, so your taxable income is not reduced for the year.
  • There may be contribution limits based on your income. Generally, you can contribute $5500 to an IRA if you are under 50 years old and $6500 if you’re 50 or older. This amount is lowered and potentially completely phased out if you make too much money. For married couples filing jointly, the phase-out range is $173,000 – $188,000 (up $5000 from 2012). The range drops down to $112,000 – $127,000 for those filing as single.

READERS: Are there any advantages/disadvantages that I didn’t mention?

roth ira infographic


    • says

      Not being able to contribute because you make too much would be a great problem to have. I hope to reach that threshold soon as well.

    • says

      I prefer to have both. My employer matches 50% of my contributions up to 15% of my total pay. I max that out and personally contribute to my self-directed Roth IRA.

      What kind of fees are you referring to in your Roth IRA? The fees that I incur are actually LOWER than my 401k. Most of the mutual funds in my 401k have expense ratios of around 1.00%, which is much lower than an ETF (~ 0.15). I invest in ETFs and stocks in my Roth. Generally, the only fees I pay are commissions and in some cases, the ETF commission is $0.


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