We have all dreamed about retirement at one time or another. However, if you do not have enough saved, it could turn into a nightmare. If you’ve secured a company 401 or an individual retirement account (IRA) then you are off to a great start! However, both of these options will be treated and taxed like regular income when you retire. If you want to live your retirement years tax-free, then maybe you should consider a Roth IRA. Find out more about Roth IRAs and the rich benefits this retirement savings option offers.
What is a Roth IRA?
A Roth IRA allows a person to save for his or her retirement by contributing to the account via after-tax income. After-tax income is your take-home pay after the deduction of federal, state and withholding taxes. It’s a great option because it allows your money to grow tax-free because you have already paid taxes initially. If you have an account for more than five years, you can make withdrawals tax-free once you reach the age of 59½. Roth IRAs can easily be set up through a brokerage or at a banking institution. Your contributions will be invested in either stocks or mutual funds. Then, just sit back and watch your money grow tax-free!
Benefits of Opening a Roth IRA
A Roth IRA is a great option for anyone who expects to be in a higher bracket when he or she retires. Unlike a 401k or a traditional IRA where withdrawals made during retirement are taxed just like income, withdrawals from a Roth IRA are not taxed.
Roth IRAs are also beneficial for young people just starting out in the workforce. It offers them the opportunity to start building wealth early on, tax-free.
Other Benefits of Roth IRAs Include:
- No withdrawal age restrictions if you have a Roth IRA more than five Traditional IRAs require you to reach the age of 70½ before funds can be withdrawn.
- Beneficiaries can be added to the account and will be allowed to make withdrawals tax-free as well.
- If you choose to work past retirement age, you can still contribute to your Roth IRA as long as your income falls within the restrictions.
Eligibility and Contribution Restrictions
If you are over the age of 50, the annual max contribution amount is $7,000, and $6,000 if you are under the age of 49. In order to contribute to a Roth IRA your adjusted gross income (AGI) must fall within the following parameters:
Married couples filing jointly with an AGI less than $193,000 can contribute up to the annual limit. If a couple’s AGI falls between $193,000 and $203,000, they may be able to contribute a reduced amount.
Single tax filers with an AGI less than $122,000 can contribute the maximum amount. Those with an AGI between $122,000 and $137,000 can contribute a reduced amount.
Secure your financial future by opening a Roth IRA today. It will provide you with the funds you will need for a well-deserved retirement. Visit with us at Care Financial so we can discuss your wealth management options.
Care Financial is a privately owned and operated business providing families, individuals and businesses with comprehensive wealth management strategies. Contact us online at www.carefinancialonline.com or call us at 251-633-7122.