A Roth IRA is an individual retirement account that allows you tax free growth and tax free withdrawals as long as you are aged 59 1/2 and have held the funds in your Roth IRA for at least five years. A Roth is funded with after tax money from your paycheck. Below I will give you 4 reasons why you should open a Roth IRA.
4 Reasons to Open a Roth IRA
- No age limit. Contributions do not stop when you turn age seventy and a half. You can continue to contribute to a Roth IRA for as long as you live, as long as the funds come from earned income.
- No employer restrictions if you have a 401K. The maximum amount you can contribute to a Roth IRA in 2019 if you are under age fifty is $6,000.00, if you are age fifty or over you can contribute $7,000.00.
- There are no required minimum distributions (RDMs) like a 401k.
- A Roth IRA can be passed to your beneficiaries with tax free withdrawals.
Roth contributions are not tax deductible. If you are married your spouse will need to set up a separate Roth IRA. The deadline for contributing to an IRA is normally April 15th of the following year. There are income limits, if you are single, your adjusted gross income can not exceed $122,000.00. If you are married the income limit is $193,000.00.
Before making any investment decisions, take into account your current tax bracket and where you will be in retirement. If you have a Traditional IRA and a Roth IRA the combined total can not exceed $6,000.00 if you’re under age 50. If you are 50 or older the maximum contribution is $7,000.00 for 2019. Most predict that their taxable income will be lower during retirement but that’s a decision that each of us must determine.
If you’re off to a late start in saving for your retirement, a Roth IRA can be an option for you if you’re planning to continue working allowing you to continue to save as long as you have earned income.
Start today, it’s easy to get started, many brokerages can be contacted online or by phone such as Vanguard, Charles Schwab or Fidelity. M1 Finance allows you to start saving in a Roth IRA with as little as one hundred dollars, just download the app to your phone. These are just a few of the many options available to you for a Roth IRA.
If you need more information on a Roth IRA go to www.irs.gov.
Please consult with a financial planner before investing.