Roth IRAs and Roth 401(k)s

Roth IRAs always come with an enormous long-term tax advantage, and that is that the Roths contributions aren’t deductible, but the withdrawals are completely tax-free. Two notes worthy of mention: you first need to have held a Roth IRA account for a minimum of five years before taking tax-free withdrawals.

The five-year clock usually starts ticking when the money is deposited into a Roth IRA in two ways: either through a contribution, or a conversion from the traditional IRA. Second, even if you can withdraw the sum you contributed any time you like without being obliged to pay any tax, you have to be at least 59 years old to withdraw the money, without having to face a 10% early-withdrawal penalty.