Are You Using a Roth IRA?

While question 3 of 4 is titled “Are you grabbing every tax break you can?“, it’s really just asking you whether you’re contributing to a Roth IRA. A Roth IRA is a retirement account that grows tax-free, your contributions are post-tax dollars but your earnings and disbursement are never taxed. This differs with a 401k in that the 401k is tax deferred, you don’t pay taxes on your contributions but you pay them on earnings and disbursements. They’re two different but both excellent ways to save for retirement. Roth IRA Explained is a great mini-site that explains how Roth IRAs work.