6 Reasons Suze Orman Is So Bullish on Roth IRAs

Suze Orman is a famous financial expert, and her enthusiasm for Roth IRAs has helped many investors understand the power of these accounts.

Unlike traditional IRAs, Roth IRAs are designed to let your money grow tax-free rather than just tax-deferred. Orman sees them as a valuable tool for people hoping to build wealth and maintain flexibility.

Here are six reasons Orman recommends Roth IRAs.

Orman says one of the greatest benefits of a Roth IRA is that your gains grow tax-free. Once you contribute, you'll never owe the IRS any taxes on your account's future growth or withdrawals as long as you don't withdraw the money before the age of 59 1/2.

Orman believes this tax-free growth allows you to make the most of your investments without worrying about how much money might go to taxes later.

With traditional IRAs and 401(k)s, you must start withdrawing funds through required minimum distributions (RMDs) at age 73. This is true whether you need the income or not.

However, Roth IRAs have no RMDs, which Orman sees as a huge advantage. By allowing you to keep money invested for as long as you like, Roth IRAs give you more control over how you withdraw the cash and let your savings grow tax-free as you age.

Orman frequently warns about the possibility of rising tax rates in the future, which could impact retirees drawing income from traditional retirement accounts.

With a Roth IRA, you do not pay taxes on withdrawals, which protects you from potentially higher tax rates in retirement. This offers financial peace of mind and ensures your retirement income isn't diminished by future tax hikes.

One of Orman's lesser-known recommendations is to open a Roth IRA for your children if they have any earned income.

Contributions to a Roth IRA while a child is young can lead to years of compounding growth, giving your kids a head start in their own financial journey. This approach reflects Orman's belief in starting financial planning early to take advantage of long-term growth.

If you plan to pass down wealth, a Roth IRA can be a smart vehicle, as it allows heirs to inherit tax-free income.

Orman advises using Roth accounts for legacy planning, and this strategy is especially helpful if your heirs will be in a higher tax bracket when they inherit your money.

Roth IRAs also offer flexibility that many other retirement accounts simply do not. Orman notes that Roth contributions — but not earnings — can be withdrawn at any time without penalties or taxes.

This feature makes Roth IRAs useful for emergencies or unexpected expenses, providing a financial cushion without derailing your retirement savings. 

Orman sees this flexibility as a practical advantage for anyone aiming to get ahead financially by being prepared for any situation.

Orman's advocacy for Roth IRAs is rooted in their flexibility, tax advantages, and potential for long-term growth.

The ability to make tax-free withdrawals while avoiding RMDs means a Roth IRA can serve you and your heirs well over time.

If you're ready to start investing, you might want to consider adding contributions to a Roth IRA as part of your financial strategy.