Investment Flexibility

• A Roth IRA offers a great deal of flexibility when choosing investments. If you're a conservative investor, you can stick to low-risk investments like bonds or money market instruments. If you're younger and are willing to ride out the ups and downs of the stock market over time, you can invest in stock-based mutual funds. You can also diversify your portfolio by choosing a combination of investment types. No matter what type of investments you choose, the earnings grow on a tax-free basis.
  
  

Tax-Free Retirement Withdrawals

• Because you've already paid taxes on the Roth contributions, you won't pay taxes when you withdraw the money at retirement, as long as you've had the Roth for at least five years. This differs from products like traditional IRAs and annuities where you begin to pay taxes when you take the money out. This can be an important benefit during your retirement years when income is often lower and every penny counts.
  
  

Accessibility

• Unlike other retirement vehicles such as traditional IRAs and 401k plans, you can withdraw money from a Roth IRA prior to age 59 1/2 without penalty, as long as the amount doesn't exceed your total contributions. The money can be used for any reason or purpose you choose, such as covering a financial emergency or to help pay for your kids' education. You are not obligated to repay the money, although not doing so obviously reduces the amount of money you'll have at retirement.
  
  

Home Purchase Assistance

• For many first-time homebuyers, coming up with the money for a down payment on a home can be a struggle. As of 2011, if you have a Roth IRA, you can withdraw up to $10,000 without penalty, which includes earnings as well as contributions, to put toward a down payment, provided you've had the account for at least five years. Your contributions would be used first, followed by the earnings. If your spouse has also had a Roth for at least five years, this means the two of you can take out up to $20,000 in total. If you've had the account less than five years, you would pay taxes only on any earnings you withdraw.