Roth IRAs are all the rage for young Americans

Young people who want to save money for retirement are flocking to Roth IRAs. Roth IRAs take advantage of tax-free growth and the flexibility to access contributions without penalty.

Young Americans are taking advice from parents and workplace financial coaches and are choosing Roth contributions as a way to build towards retirement. Unlike other retirement builders, Roth IRAs do not require mandatory distributions like traditional IRAs do.

Unlike 401ks, Roth IRAs require individuals to actively set up and maintain contributions. But they offer greater flexibility in accessing funds if needed. Roth IRAs allow you to withdraw your contributions at any time without penalty. This means that you don’t have to hesitate when contributing for fear of losing money you may need later.

And these advantages have borne fruit in terms of getting young Americans on board. Of those who contribute to an IRA or Roth IRA, 41% were under 40 in 2022, up from 28% in 2016, according to the latest data.

Young people have historically not been the best savers. They still have a lot to improve in the saving department as a group, but there seems to be some progress in understanding the importance of saving early and often.

If these trends and continue to improve, more and more Americans will achieve financial independence, and not have to worry about how they will fund a retirement for themselves.