Roth IRAs are a highly recommended retirement account for a reason. Originally introduced as the ‘IRA-Plus’, these accounts were designed to empower middle-class Americans to save for retirement. To this end, they come with a great incentive: tax-free withdrawal.
But that’s not the only reason Roth IRAs are worth consideration. Here are four additional benefits these accounts offer:
It Can Be Easier to Get Early Access
In an ideal world, you won’t need your savings until you retire, but sometimes you may need to withdraw funds earlier than expected.Because contributions to a Roth IRA are already taxed, it’s easier to avoid additional taxes and penalties if you need access to funds earlier than expected.
Almost Anyone Can Contribute to a Roth IRA
There are income limit rules that determine one’s ability to contribute to a Roth IRA. However, there are also possible workarounds, like backdoor Roth IRAs.
You May Benefit from Tax-Free Retirement Income
The money you invest in a Roth IRA grows tax-free, and you won’t have to worry about reporting your investment earnings when you file your taxes. Additionally, if you’re 59.5 or older and have owned your account for at least five years, you can withdraw the money (contributions and earnings) from your Roth IRA without paying penalties or taxes.
You May Be Able to Use a Roth IRA and a 401(k)
If you’re looking for multiple retirement savings and investing options, you may not have to decide between a Roth IRA and a 401(k). It’s possible to contribute to both types of accounts if you qualify and stay within the contribution and income limits.
Roth IRAs may not fit everyone’s financial goals, but their popularity is hard to overlook. They’re a great option for a variety of reasons. Contact the office if you want to talk more about maximizing a Roth IRA as part of the strategy we’re planning together.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.
For discussion purposes only and in no way represents legal or tax advice. For advice regarding your specific circumstances, the services of an appropriate legal or tax advisor should be sought.
Converting from a traditional IRA to a Roth IRA is a taxable event.
A Roth IRA offers tax free withdrawals on taxable contributions.
To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.