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Benefits & Risks
Benefits & Risks
A Roth IRA can be a useful retirement tool, but it is important to understand both the benefits and the risks.
Benefits
Benefits
Tax-Free Qualified Withdrawals
Tax-Free Qualified Withdrawals
Roth IRA contributions are made with after-tax money, and qualified withdrawals can be tax-free.
Long-Term Growth Potential
Long-Term Growth Potential
Money invested inside the account has time to potentially grow and compound over many years.
No Required Minimum Distributions for the Original Owner
No Required Minimum Distributions for the Original Owner
Roth IRA owners generally do not have to take required minimum distributions during their lifetime.
Risks & Limitations
Risks & Limitations
Investments Can Lose Value
Investments Can Lose Value
A Roth IRA does not guarantee returns. The investments inside the account can rise or fall.
Fees Matter
Fees Matter
Account fees and investment expenses can reduce how much of your return you keep.
Contribution Rules Apply
Contribution Rules Apply
The IRS limits how much you can contribute and sets income and eligibility rules.
Withdrawals Have Rules
Withdrawals Have Rules
Taking money out early can affect taxes, penalties, and your long-term growth.
Activity: Benefit or Risk?
Activity: Benefit or Risk?
Write Benefit or Risk/Limitation.
Qualified withdrawals may be tax-free.
Investments inside the account can lose value.
The original owner generally does not have required minimum distributions.
Fees can reduce investment returns.
IRS contribution limits apply.
Module 5 Takeaway
Module 5 Takeaway
A Roth IRA can provide:
Tax advantages + long-term growth potential
But remember:
Returns are not guaranteed, fees matter, and IRS rules apply.
Activity Answer Key
Activity Answer Key
Benefit
Risk
Benefit
Risk
Risk/Limitation
Sources
Sources
IRS — Roth IRAs
https://www.irs.gov/retirement-plans/roth-iras
IRS — IRA Contribution Limits
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
IRS — Required Minimum Distributions
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Investor.gov — Individual Retirement Accounts
https://www.investor.gov/introduction-investing/investing-basics/investment-accounts/tax-advantaged-accounts/retirement-savings/individual-retirement-accounts-iras
Investor.gov — Fees and Expenses
https://www.investor.gov/introduction-investing/getting-started/understanding-fees
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