This Labor Day, make your money work for you with a Roth IRA Sep 02, 2013, 9:00 am By Heidi Carmack Pfaffroth

Happy Labor Day! Remember, all branches are closed for the holiday!

As Americans take a break from their usual work this Labor Day, they should consider how to make their money work harder for them. One way to do this is with a Roth IRA. IRAs—Individual Retirement Arrangements—are personal accounts that may allow individuals to receive tax advantages for money they save for retirement.  Roth IRAs may benefit individuals because they can save money for retirement now, even if they’re starting their first job out of school and may not have retirement in their near future.

Roth IRAs are different from traditional IRAs because tax is paid on the money when it is contributed, rather than when it’s used—so it may be a good choice for someone young or who expects to be in a higher tax bracket when they’re ready to withdraw funds. Distributions of principal and interest are tax-free, assuming the individual follows the guidelines set forth by the IRS.

Why would an individual consider a Roth IRA?

• They want to save for retirement.

• They may be leaving a company and need somewhere to place their 401(k) earnings.

• They want to save money now, even if they don’t have very much to save from each paycheck. The money they save will earn interest and grow.

• They have a goal to save, but struggle to stay motivated and not pull their funds from long-term savings, since Roth IRAs have penalties for withdrawing early.

Even individuals who are not close to retirement may want to consider saving in a Roth IRA, so their money is working for them. To learn more, visit or speak with a Bank of American Fork representative at 800-815-BANK.

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3 Responses to This Labor Day, make your money work for you with a Roth IRA

  1. Larry says:

    Although the tax bracket difference is important that you pointed out, you missed the best advantage of a ROTH. The best advantage is the for long time growth retirement the EARNINGS are withdrawn tax free!

  2. Heidi Carmack Pfaffroth says:

    Thanks, Larry! We mentioned that tax is paid when the money is contributed instead of when it’s used, but I’m glad you mentioned it again more clearly!

  3. Tom says:

    I still don’t understand really what the big difference is. Even though it’s taxed going in instead of going out the penalty still exists for early withdrawal. So in the event of financial hardship that would necessitate accessing some of the money, how much actual %age difference is there when it all boils down? Uncle Sam is still going to make sure they get their predetermined cut. Before/after it doesn’t matter. They are the house. And the house always wins, right?

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