Retirement expert: ‘Stop taking pictures of your food and open a Roth IRA'

The average person spends roughly 18 years in retirement, according to the U.S. Census Bureau. Retirement expert and founder of IRAHelp.com Ed Slott joined Yahoo Finance’s the Final Round to discuss the importance of being smart with your money and being aware of the rules and regulations governing your retirement savings accounts.

For example, once you turn 70 1/2, you are no longer allowed to contribute to a traditional IRA and must begin the process of taking annual required minimum distributions (RMDs). “You got these tax deductions all along. But at some point, the government said, look, we're sick and tired of waiting for you to drop dead, and we want our money back. That's called the required minimum distribution. So at some point, the tax shelter has to end and the money has to come out,” Slott explained.

Little white piggy banks standing on top of 7 stacks of coins in ascending order on white surface, green background
Little white piggy banks standing on top of 7 stacks of coins in ascending order on white surface, green background

And whatever you do, Slott said, make sure you do it right. “And you better make sure you have the right amount because it's one of the highest penalties in all of the tax code if you blow it — 50% penalty on the amount you should have taken but didn't.”

Slott says Roth IRAs are ideal for certain investors. “One of the big benefits, besides that it's all tax-free, is that while you were alive, during your lifetime, there are no required minimum distributions from Roths.”

Investing in your retirement
Investing in your retirement

Roth IRAs only require withdrawals after the death of the owner — with a caveat, explained Slott. “But when you die and a non-spouse, like a child or grandchild, inherits, they do have required distributions. And the same 50% penalty applies to them. Can you imagine getting a 50% penalty on a distribution that would have been tax-free if you only knew to take it?”

Slott also had some advice for folks far away from retirement. “Here's my advice for young people: Stop taking pictures of your food, and open a Roth IRA.”

Ralph Rezza is a production assistant at Yahoo Finance. Follow him on Twitter at @rrezza2

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Retirement expert: ‘Stop taking pictures of your food and open a Roth IRA'

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