One of the best retirement saving tools still is not sufficiently understood or employed.
The Roth IRA, created in 1997, is utilized by just 16 percent of U.S. households. If more people grasped the benefits, that number would be much higher.
Roth IRAs are fundamentally different than traditional IRA accounts (which usually hold pretax assets). Contributions to a Roth are after-tax transactions and therefore not deductible.
However, the investment gains earned on these after-tax contributions are exempt from income taxation, as long as the first contribution is held at least five years, and the account owner is at least 59-1/2 years old. This is an important distinction: not tax-deferred, but totally tax-free.
And not just tax-free to you, but to your heirs as well. Unlike a traditional IRA, there is no required minimum distribution with a Roth, so you can continue to contribute as long as you have income, and pass the assets along to your heirs with no income tax liability.