7 Roth IRA benefits you don't want to miss

There's a reason savers of all ages can't stop talking about the Roth IRA (individual retirement account). It's bursting with exclusive benefits that you can enjoy during every stage of your life journey.

But there's a caveat: You must have earned income and fall below the annual income limits to make direct contributions to a Roth IRA. That's what makes the Roth IRA a limited-time offer. As soon as your income exceeds the threshold, you'll have to find alternative ways to reap the benefits of this highly coveted account.

If you've been on the fence about saving for retirement or have no idea about the perks you can tap into, here are seven good reasons to maximize the power of a Roth IRA now.

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1. Grow your investments tax-free

Let's cut to the chase and dive into America's most desired Roth IRA benefit: tax-free income. This is a good deal if you expect to be in a higher tax bracket later in life.

Let's say you contribute $6,000 every year for the next 40 years and invest in high-quality assets that earn a 7% return. If you start young, you can turn that $240,000 into $1 million. You'll be eligible to withdraw all the money 100% tax-free after you've reached 59 1/2 because you already paid taxes on the contributions.

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2. Contribute at any age

The earlier you start contributing to a Roth IRA, the better chance you have of building a million-dollar portfolio.

The Roth IRA has no age restrictions, making it easier to leverage the power of time to supercharge your portfolio. If you're wondering if you can contribute to a Roth IRA on behalf of your 3-year-old daughter who earns money as a model, the answer is yes. Follow the rules for opening a Roth IRA for kids to ensure you are on the right track.

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3. Tap into contributions when needed

If you contribute $6,000 and your money grows to $8,000, you can withdraw your $6,000 contribution without being penalized or taxed. Proceed with caution when it comes to withdrawing earnings. If you touch your earnings before you're eligible, you could be subject to taxes and penalties.

This makes the Roth IRA a great backup emergency fund if you're ever in a pinch, although it's easier to maximize the Roth IRA's growth potential if you keep your money invested.

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4. Skip required minimum distributions

Some retirement accounts come with a mandate to start withdrawing contributions at a certain age. They're called required minimum distributions (RMDs) and they can be a pain during tax time if the money you receive pushes you into another tax bracket and you haven't prepared for it.

There's no need to worry about RMDs with a Roth IRA. It's a nonexistent topic in the world of Roth IRAs, allowing you to keep your money invested for decades and enjoy the potential for more tax-free growth. If you don't need to touch the funds during your lifetime, you can bequeath the account to your heirs and leave them with some of your retirement goodies.

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5. Fund your college education

You might be able to ditch student loans thanks to your Roth IRA. If you're attending college, you have a chance to tap into your Roth IRA to cover expenses.

You won't incur the 10% early withdrawal penalty as long as the funds are used to pay for qualified education expenses that are required for enrollment. This can include tuition, fees, books, and supplies.

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6. Buy your dream home

The IRS allows you to use up to $10,000 of investment earnings to build, rebuild, or buy a home without incurring a 10% early withdrawal penalty.

It's a great incentive to start making the maximum contributions today so that homeownership withdrawals could be an option in the future. For 2021, you can contribute up to $6,000 to a Roth IRA if you're under 50 and an additional $1,000 if you're 50 or over.

Follow the rules and consider your retirement situation to ensure you can make the most of this Roth IRA perk.

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7. Earn the Saver's Credit

If the above benefits weren't enough to spark interest in the Roth IRA, maybe this will rock your world: a tax credit that you can use right now.

The IRS provides a Saver's Credit for up to $2,000 to low- to moderate-income taxpayers who save for retirement. Eligible savers can claim a 50%, 20%, or 10% tax credit that can potentially wipe away their tax bill. Since the Saver's Credit is nonrefundable, you'll be able to reduce your tax tab to zero, but not beyond that.

Do your retirement research and consider a Roth IRA so that you can start reaping some of these benefits today.