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10 reasons you need a roth ira
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10 reasons you need a roth ira


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Reasons a Roth IRA is the best retirement option

Reasons a Roth IRA is the best retirement option

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  • 1. 10 Reasons You Need a Roth IRA
  • 2. 1. Tax-free growth and withdrawals • Roth IRA withdrawals in retirement are tax-free. • Traditional IRA contributions can be tax-deductible now, but withdrawals in retirement are taxed as income. flickr/ 401(k) 2012
  • 3. 2. No required minimum distributions • Unlike traditional IRA accounts, which require withdrawals by age 70-½ , Roth IRA accounts don’t require you to take money out until you’re ready. • Theoretically, you could let your money compound tax-free until you’re 100. Flickr/ Steven Dipolo
  • 4. 3. Leave your money to heirs tax-free • Roth IRAs can be passed on to your heirs, who can take either a lump sum or periodic distributions tax- free. • The account must be at least five years old to prevent heirs being taxed on the account’s gains. Flickr/ steakpinball
  • 5. 4. Withdrawals not included in MAGI • When you withdraw from a traditional IRA, the money counts in your modified adjusted gross income. • Roth withdrawals don’t count in MAGI. • This could help you stay in a lower tax bracket and help you avoid things like the Medicare surtax on investment income.
  • 6. 5. Withdraw your contributions at any time • Unlike a traditional IRA or 401(k), you can withdraw your Roth IRA contributions (but not gains) tax- and penalty-free at any age, and for any reason. • With other accounts, a 10% early- withdrawal penalty can be assessed. Flickr/ OTA photos
  • 7. 6. Contribute as long as you work • You can make contributions to a Roth IRA so long as you have earned income, even if you’re past “retirement age.” Flickr/ kdothq
  • 8. 7. Take advantage of your lower tax bracket now • If you’re young, chances are your income will rise over your working life, putting you in a higher tax bracket when you retire. • Therefore, it could be to your advantage to pay tax on your income now and get tax-free withdrawals later, when you’re in a higher tax bracket. Flickr/ 401(k) 2012
  • 9. 8. 16 months to contribute • You have until the tax deadline (April 15) to contribute to your Roth IRA for the previous tax year. • This benefit goes for all IRAs, but it’s worth knowing. • So, if you’re starting late, you have extra time to maximize your 2014 contributions. Flickr/ efile989
  • 10. 9. Income is not (really) a factor in eligibility • While you need to earn less than a certain income amount to contribute directly to a Roth IRA, anyone can convert a traditional IRA to a Roth IRA at any time, regardless of income. • Check out this article for full details on how to accomplish this.
  • 11. 10. Choices, choices, choices! • Unlike most company-sponsored retirement plans, IRAs allow you to invest in virtually any stock, bond, or mutual fund. • Some brokers will even let you use options and futures in your IRA accounts. Wikipedia/ deerstop
  • 12. How to boost your income in retirement