The White House has threatened to slap tariffs on apparel and footwear, leading retailers to speak out about how this would hurt business.Retailread more
"We are now embarking on a new Long March, and we must start all over again!" Xi Jinping said.Marketsread more
Stock pickers are having their best year in a decade, according to Bank of America Merrill Lynch.Marketsread more
While investing often seems like a contrarian game where going against the flow feels like the better bet, the reality is that investors who bought the most-favored stocks...Hedge Fundsread more
Craig Irwin of Roth Capital Partners said Apple tried to buy Tesla six years ago for a higher price than where the stock now trades.Technologyread more
CNBC's Jim Cramer says Morgan Stanley cutting its worst-case forecast on Tesla so drastically from $97 per share appears to be a gimmick.Investingread more
Connecticut state Sen. Alex Bergstein's divorce case with her husband, Morgan Stanley managing director Seth Bergstein, has exposed her new romantic relationship with her...Politicsread more
U.S. aviation officials believe a bird strike may have led to the deadly crash of an Ethiopian Airlines Boeing 737 Max in March, according to a person familiar with the...Aerospace & Defenseread more
The escalating trade war between China and the U.S. could increase pressure on the overall economy, according to Boston Fed President Eric Rosengren.The Fedread more
May outlined her new Brexit proposals which are being voted on by politicians next month.Europe Marketsread more
The Time's Up Legal Defense Fund, the American Civil Liberties Union and fast-food workers coalition Fight for $15 said Tuesday that they have filed 23 new complaints against...Restaurantsread more
According to CNBC's Jim Cramer, it does not matter how good an investor is at picking stocks. If the funds are kept in the wrong account, tons of money could be wasted in hidden fees and opportunity could be missed.
This logic is especially applicable to 401(k) and IRA retirement accounts, and whether it makes sense to use a Roth account.
"I think that, aside from the earned income tax credit, the Roth IRA may be the single greatest thing our government has done for low-income families since the end of the war on poverty, which at best, ended in a draw, with poverty possibly winning on points," the "Mad Money " host said.
When deciding among a Roth IRA, 401(k) or a traditional account, it depends if it makes more sense to pay income tax now or to wait and pay income tax after retirement. This is a complicated decision that has more to do with the specifics of a situation and whether one anticipates they will be in a higher tax bracket at retirement.
With a Roth, contributions are made with after-tax income and the money in the Roth IRA will not be taxed again. There is also an income limit, depending on if you file joint or single. According to the Internal Revenue Service, for 2016, contributions to both traditional and Roth accounts cannot exceed $5,500 for individuals under age 50, and $6,500 for those over 50.
As long as the cash remains in the Roth account, you will not pay dividend tax. The money can be withdrawn without a penalty at any time, as long as it's in a Roth account.
Another perk to a Roth IRA is that after five years, money contributed — not your gains — can be withdrawn without the usual 10 percent penalty. This is very different from a regular IRA, where there are no taxes on contributions until money is withdrawn.
"For anyone whose marginal tax rate is 25 percent or less, which is most of America, I think you go with a Roth. Better to take the hit up front, then allow your Roth IRA to compound tax free for the rest of your life," Cramer said.
The same rule applies to a 401(k); however it is important to note that the contribution limits for this type of account are much higher than for an IRA. In 2016, the IRS stated a contribution limit of $18,000. Unlike a Roth IRA, there are no income limits for a Roth 401(k).
"The less you make, the more likely it is that a Roth is for you. It's that simple," Cramer said.
Correction: This story was adjusted to reflect that money can be withdrawn without penalty at any age from a Roth account.