Posted by: c864916 March 29, 2018
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A response/correction to @kalikopoi
Why do you need roth IRA if you can invest in funds like SPY, VOO, VOOG, QQQ etc?
- To avoid paying tax on dividends and capital gains since Roth IRA is a tax-sheltered account. Plus you can trade individual stocks, bonds, ETFs and index fund within a Roth IRA account.
Pretty much same fees or less than IRA providers...
- Fees may be cheaper in a Roth IRA. By opening Roth IRA account through Vanguard, the transaction fee will be waived for trading any Vanguard funds like VOO, VTI, etc.
These provide more flexibility than IRA accounts as you can trade these any time and have no early withdrawal penalty
- There is a common misconception about withdrawal penalty. You do not pay any early withdrawal penalty on Roth IRA account.
- You can trade anytime and transfer funds back to your bank account without tax consequences.
TLDR; If you are eligible, you can stash $5,500 every year in a Roth IRA to trade as much as you want without any tax consequences (no dividend tax, no capital gain tax, and no early withdrawal penalty)