While a Roth individual retirement account can certainly help increase the size of your nest egg, it's always important to weigh the pros and cons before you invest, says Rianka Dorsainvil, a millennial certified financial planner and owner of Your Greatest Contribution.
Dorsainvil says it's important for everyone to understand all the benefits offered when investing in a Roth IRA. Dorsainvil, who works with Gen Y clients and helps navigate them through their financial lives, urges them to invest in Roth IRAs.
"A Roth IRA is a hidden gem when it comes to investing," she said. "And that's especially true for young professionals."
She points out that a Roth IRA offers many lucrative benefits, such as flexibility on withdrawals and distributions, an array of investment opportunities and the minimal tax penalties associated with it. There are, however, a few drawbacks to a Roth IRA.
There is a contribution limit. The maximum allowable annual contribution limit is $5,500, or $6,500 if you're age 50 and over. Also, unlike traditional retirement accounts, Roth IRAs have income restrictions.
The Internal Revenue Service sets income eligibility rules for a Roth IRA each year. These limits are based on modified adjusted gross income. This year a single person with a MAGI of $133,000 or more and a married couple making more than $196,000 cannot directly fund a Roth IRA.