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Are You Using This Retirement Savings Account?

Alex LaRosa, CFP®

Alex LaRosa, CFP®

Investment Advisor Representative

May 3, 2019

Are You Using This Retirement Savings Account?

Do you make less than $122,000 a year ($193,000 if married)? Do you have children with earned income less than that? If you answered yes to either of these, then are you contributing to a Roth IRA? If you are good for you! If you are not, then you should keep reading to learn why you may be missing out.

What is a Roth IRA?

The Roth IRA is a retirement savings account that is funded with post-tax income. This means that you will not be able to deduct your contributions like you would with a traditional IRA. In return for this, a Roth IRA allows your contributions to grow tax free AND allows for tax free withdrawals in retirement. This is especially beneficial for someone who will be in a higher tax bracket in retirement than they are now.

Other Benefits of a Roth IRA

While it is impossible to predict where tax brackets will be in the future, it is important to consider the other benefits that come with a Roth IRA. One of the biggest is that there are no required minimum distributions (RMDs). With a traditional IRA, which requires you to begin withdrawing money at age 70.5, a Roth will allow you to keep funds in the account for as long as you want. This feature is particularly advantageous when it comes to estate planning. When your children inherit your Roth after you pass they will not be required to withdrawal any funds allowing it to continue its tax-free growth. A Roth IRA also allows you to make contributions after the age of 70 which is good for those who want to work longer and continue saving.

Traditional IRA vs Roth IRA

There are plenty of calculators out there that will compare a traditional and a Roth IRA and which one will be better for you. All these calculations however, are dependent on predicting future tax brackets which as we said before is not easy to do. What we do know is that our country is massively in debt and the easiest way to get out is to increase tax rates.

Should you open a Roth?

Every person’s situation is different, and one account may be better suited than the other. However, what you can do is take the first step and find out if you or a loved one qualify for a Roth IRA. Give one of our advisors a call and we will be happy to help you find out if a Roth is right for you.

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Are You Using This Retirement Savings Account?

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