Saving for retirement is essential in today’s world, and the younger you are when you start, the better off you will be. If you are getting ready to plan for your retirement, you will find that there are numerous investment options to choose from. While many people have retirement accounts through their place of employment, lots of individuals decide to invest additional money on their own. One type of investment product that is quite popular is the Roth IRA. The Roth IRA has been around since 1998 and offers investors the advantage of tax free growth among other things. If you are contemplating opening such an account here is what you need to know.

First, the advantages. Roth IRA accounts are simple to get started and there is a variety on investment options for the money you contribute. You can disperse your money in products like mutual funds, stocks, CD’s, real estate and more. Even better, all of the money you contribute to the IRA will grow tax free.

Unlike other types of retirement accounts, you will not get penalized if you decide to withdraw from the funds you have contributed to the account, no matter what your age. In addition, when you turn 59 ½ you can start to take out the earned money without paying any fees.

If you are ready to buy a home and need additional funds, you can withdraw money from your Roth IRA to help with your down payment. You can even withdraw account earnings in the amount of up to $10,000. The only stipulation is that the home you are purchasing must be your primary residence and not a vacation or investment property.

Another great advantage or the Roth IRA, unlike other retirement products, is that you do not have to start taking funds out of the account by a certain age. Also, if you were to die, your account is transferred to your beneficiary (usually your spouse) who can combine it with their account, penalty free.

As you can see the benefits of having a Roth IRA are great, but before you open your account you should also consider the cons.

First off, all of your contributions to the Roth IRA will be taxed up front and your contributions do not reduce your adjusted gross income for the year. Contributions to regular IRA’s and other retirement plans will adjust your annual gross income.

There are also strict income limitations and if you do not meet them, you cannot even open a Roth IRA account. If you do open a Roth IRA and down the road your income increases past the income cap, you will no longer be able to contribute funds to your account. In addition, you are only allowed to contribute a certain amount of money each year. Currently if you are 49 years old or younger you can contribute$5,000 per year and if you are 50 years or older you can contribute $6,000 per year.

Finally, if you need to tap into your account earnings before the age of 59 ½, early withdrawal fees come with the price tag of 10%.