Your Roth IRA is a golden gift account from the IRS that protects your assets from taxes for decades. So, after contributing to the Roth IRA account, with after-tax dollars, the investments within the account grow and compound tax-free.

The icing on the Roth IRA cake is that you can withdraw the money in the account, tax-free if you’re over age 59 ½ and if the funds had remained in the account for at least five years. If that’s not enough, unlike a traditional IRA or 401(k) retirement account, you can pass the account on to your heirs without taking any required minimum distributions during your lifetime.

In 2018, you’re allowed to contribute up to $5,500 per year into a Roth IRA, and $6,500 if you’re over age 50. Although, if you’re single or a head of household, you must earn less than $120,000 to contribute fully to a Roth IRA.

Married filing jointly taxpayers must earn less than $189,000 to make a full Roth IRA contribution. You can also roll over funds from other retirement accounts into a Roth and pay taxes on the rollover amount.

To maximize your benefits, fill the account with investments which would typically be taxed at a high rate. Or, open your Roth IRA with a low-fee robo-advisor to get all the benefits without the hassle of managing the account yourself.

Stocks Bought and Sold by Frequent Traders

If you belong to the investment cohort of high-frequency traders, you might want to conduct your investing within your Roth IRA. Typically, frequent buying and selling triggers short-term capital gains (and losses) that are taxed at higher rates than the long-term capital gains rate.

Trading within a Roth IRA is great, as long as you’re garnering gains. The downside is that you won’t be able to deduct your losses as the IRS allows a maximum of $3,000 of taxable losses to be deducted annually.

Real Estate Investment Trusts (REITs)

REITs give ordinary investors the chance to invest in all types of real estate (from commercial office buildings to strip malls), mortgage debt and more. Additionally, REITs are required to pay out at least 90% of their income to shareholders in the form of dividends.

If you don’t need the income, REITs are great investments to hold in your Roth IRA since the dividends are taxed as ordinary income. If you’re in a higher tax bracket, owning REITs in your Roth IRA will curtail your tax bill.

Although REITs enjoy lower capital gains taxes when you sell your REIT for a profit. This tax rate, plus a 3.8% surtax, also applies if the REIT pays out a capital gains distribution to shareholders.

Corporate and Other Taxable Bonds

With rising interest rates, new issue bonds are finally providing investors with higher yields. That’s great news for fixed income investors. But, bond dividend payments typically yield greater taxable gains than growth stocks and low-turnover index funds.

Whether you invest in individual bonds or bond funds, your Roth IRA is a good place to own fixed investments. Even if dividends fall into the qualified category and are taxed at the lower capital gains rate, you’ll eliminate the responsibility of ever paying tax on the bond dividends held in a Roth IRA account.

High-Dividend Stocks

Dividend stock investing offers a two-fer. You have the opportunity for stock price growth, and you’re paid to wait for the appreciation with healthy dividends. The dividend achiever stocks offer years of growing dividends, further compounding your wealth.

If you don’t need the cash, high-dividend-paying stocks are good stocks to hold in your Roth IRA. Although, if the stock dividends are eligible for a lower tax qualified rate which taxes assets at the lower capital gains rate, the tax advantage of holding these assets in your IRA is somewhat diminished.

Bottom Line on Roth IRAs

With the new lower tax rates, retirement account benefits that arise from shielding taxable investment gains are reduced. Although there’s certainly enough benefit to the glorious Roth IRA to contribute as much as you’re allowed, every year. And if you’ve got a few years until retirement, consider rolling over a traditional IRA or legacy 401(k) account into a Roth IRA.