Because its tax-free growth and flexibility of making withdrawals cannot be competed against! Studies indicate that many people do not save for retirement because they do not understand all the 401k gibberish. For example, consider an investor who contributes $2000 to a Roth IRA when he is in a tax bracket of 21%, and will be in a tax bracket of 33% upon retirement. Why? This means that investor has already paid 21% x $2000 = $420 in taxes. Since you already pay taxes before saving your money in a Roth IRA, you are not required to pay federal taxes when you make withdrawals from your Roth IRA. Also, the Roth IRA owner must not have previously owned a home for atleast 24 months. Contributions to a Roth IRA are made only from earned income that has been taxed by the Federal government.
Who Voted for this Story This means that investor has already paid 21% x $2000 = $420 in taxes.
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