Hi everyone I'm Laura Adams and you're listening to the Money Girl

Podcast. This is the second episode in a two-part guide to the Roth IRA. In the first

episode I covered what a Roth IRA is, who can have one, and the rules for making withdrawals.

Today you'll find out when you should opt for a Roth IRA, the types of investments a Roth is ideally suited for and where to get one.

As you learned in part one, an IRA is a special account that helps you build a healthy nest

egg by cutting your taxes. Contributions you make to a Roth IRA

are never tax deductible which means they're taxed before going into the account.

However your earnings in the account grow completely tax-free and

then you can take withdrawals during retirement without owing a penny to Uncle Sam.

These rules are the opposite of a traditional IRA where contributions are tax deductible,

but you pay tax on both contributions and earnings when you take withdrawals in the future.

Since a traditional and a Roth IRA both have fantastic advantages,

you may have a hard time knowing which one to choose.

Here are five situations when it does make sense to opt for the Roth.

The first situation where you'll want to consider contributing to a Roth IRA is number one when your income is low.

If you're earning less today than you believe you'll earn in the future, then the Roth

is probably your best choice.

That's because you're in a relatively low tax bracket right now, compared to what it could

be in the future.

Therefore, if your tax rate is low now, it's cheaper to pay tax on Roth contributions

than to pay tax on withdrawals from a traditional IRA in the future,

when your tax rate may be much higher.

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