Jim Cramer Declares Roth IRAs 'The Single Greatest Thing' Government Has Done For Low-Income Families Since War On Poverty

Jim Cramer, the dynamic host of CNBC’s “Mad Money,” is a legend on Wall Street. Known for his animated personality and bold investment advice, Cramer has been vocal about his love for Roth IRAs.

A Roth IRA is a retirement account that allows you to contribute already taxed money, which means the money growing inside the account is tax-free. Unlike traditional IRAs, qualified withdrawals from Roth IRAs aren’t taxed in retirement, making them a sweet deal for many savers.

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Cramer’s enthusiasm for Roth IRAs mainly focuses on their benefits for low-income families. In a recent statement, he declared, “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 kind of in a draw, [with] poverty possibly winning on points.” This powerful endorsement highlights Cramer’s belief in the Roth IRA as a tool for financial empowerment.

He further simplifies the decision-making process for potential investors by stating, ‘The less money you make, the more likely a Roth is for you. Yes, it’s that simple.' This straightforward advice encourages more people, especially those in lower income brackets, to consider Roth IRAs as part of their retirement strategy.

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Cramer also stresses the long-term benefits of Roth IRAs. He says, “For anyone whose marginal tax rate is 25% or less, which is most of America, I think you go with Roth. It’s better to take the hit up front, then allow your Roth IRA to compound tax-free for the rest of your life.” This thinking highlights how much your money can grow without taxes taking a bite.

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Financial guru Dave Ramsey agrees with Cramer, arguing that “The Roth absolutely, mathematically kicks the traditional’s butt” and believes Roth IRAs “trick you into saving more.” Author and podcast host Suze Orman, another vocal supporter, famously said, "You should be putting every single cent into a Roth retirement account," and explains that you could even make your kids millionaires with a custodial Roth account. 

Now, not everyone agrees with Cramer on Roth IRAs. Some financial experts worry about the upfront tax hit, especially if you might be in a lower tax bracket later in life. Also, there are limits on how much you can contribute to a Roth IRA, which can be a bummer for higher earners who want to use this account type.

Another concern is that tax rates will be higher in the future, which is why some folks choose Roth IRAs. Critics argue that this prediction may not apply universally, as individual financial situations vary. 

Some financial advisors also recommend diversifying your retirement savings, suggesting a mix of pretax and after-tax accounts to provide flexibility upon retirement.

Cramer might be a big cheerleader for Roth IRAs, especially for those struggling financially, but his enthusiasm keeps this retirement option in the spotlight. It encourages more Americans to consider how it could benefit their long-term financial well-being.

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