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Four Reasons to Consider a Roth IRA

Four Reasons to Consider a Roth IRA

  • 03.18.18
  • Planning & Retirement
  • Article

Taking personal responsibility in planning your financial future is more important than ever.

Thinking about opening or contributing to a Roth IRA? Learn more about the benefits of this type of retirement account and whether you may be eligible to contribute.

Consider the Positives

The key benefits of Roth IRAs include:

  • All distributions from the account can be tax-free. Although contributions to a Roth IRA are not tax-deductible, earnings grow free of taxes. When you reach age 59½, if the Roth IRA has been in place for at least five years, any withdrawal is tax-free. Avoiding the tax bite on your withdrawals means more income in retirement. This may be particularly attractive to individuals unable to deduct IRA contributions due to their participation in an employer’s plan.
  • No required minimum distributions. The tax deferral can be extended beyond the age-70½ threshold of a traditional IRA.
  • Contributions can be made after age 70½. You can continue contributing to a Roth IRA as long as you have earned income. Given that people today are living and working longer, the ability to continue making contributions can be very beneficial.
  • Withdrawals may be made penalty-free for a first-time home purchase. As with a traditional IRA, you can withdraw funds from your Roth IRA (up to a lifetime maximum of $10,000) to make a down payment on a first-time home purchase. A first-time homebuyer is defined as someone who has not owned a home for two years prior to the purchase of the new home.

Learn Your Limits

In 2018, an individual may contribute up to $5,500 to a Roth IRA (less any contribution made to a traditional IRA for that year). People 50 and over can contribute an additional $1,000 for a total of $6,500. This nondeductible contribution is available to single individuals with earned incomes and adjusted growth incomes (AGIs) of less than $120,000, or to married individuals filing joint returns with modified AGIs of less than $189,000. For single filers, the allowed contribution is phased out for AGIs between $120,000 and $135,000. For married individuals, the allowed contribution is phased out for AGIs between $189,000 and $199,000. No contribution is allowed if an individual is married and files separately, unless the AGI is less than $10,000.

Your financial advisor can answer any questions you may have about the features and benefits of IRAs and help determine which type may be appropriate for addressing your retirement needs.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James Financial Advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.