First time investor

[Brassmouth]

I'm nearly 21 years old with some savings to invest. Various people on this site have recommended Roth IRAs to young people.

Why is a Roth IRA better than a standard brokerage account? If I open a Roth, don't I have to wait until I'm 59.5 until I can reap my tax-free earnings? Isn't the government likely to raise the age limits on these accounts? I don't want to lock my savings and investments away until I'm an old man.

 

[Jordan]

I'm nearly 21 years old with some savings to invest. Various people on this site have recommended Roth IRAs to young people.

Why is a Roth IRA better than a standard brokerage account? If I open a Roth, don't I have to wait until I'm 59.5 until I can reap my tax-free earnings? Isn't the government likely to raise the age limits on these accounts? I don't want to lock my savings and investments away until I'm an old man.

Yeah, your money is locked in.

The benefit of a Roth is that you invest with post-tax income and your withdrawals are tax-free. I doubt they'd raise the age limits, but I can see them changing the tax code ala "fair tax" style and getting you with a sales tax.

Regardless, minus the early withdrawal penalty, the biggest benefit is that your investments grow tax-free. A number of financial planners now recommend "tax diversification," or putting your money in accounts that are treated differently by the IRS to smooth out any legislative risk. Maybe do a half and half, if you'd like, since Roth IRAs have a maximum annual contribution of $5,000.