Understanding Roth IRA

Saving for retirement is important for your financial future. Consider a Roth IRA because it offers five benefits.

What is a Roth IRA?

A Roth IRA allows you to contribute up to $5,500 ($6,500 for consumers over the age of 50) per year. You receive no tax benefits when you contribute, but the contributions and earnings grow tax-free.

You may withdraw funds from your Roth IRA when you turn 59-1/2 years old and the account has been opened for five years. There are no required minimum distributions. When you do withdraw money, it's tax-free and penalty-free.  

The 5 Benefits of the Roth IRA

Carefully consider five benefits of the Roth IRA as you plan your retirement strategy.
  1. Gain tax-free income during retirement.

    You will pay no taxes on your Roth IRA contributions and earnings. That's a huge advantage, especially if you'll be in a higher tax bracket when you begin taking distributions.

  2. Receive investment flexibility.

    Retirement funds such as certificates of deposit or traditional IRAs require you to wait for distributions. Your Roth IRA offers greater flexibility.

    Withdraw funds from your Roth IRA for any purpose when you turn 59-1/2. There are no required distributions or penalties. Also, you may withdraw funds sooner than 59-1/2 years of age for these purposes.

    • First-time home purchase
    • Postsecondary education expenses
    • Permanent disability
    • Unreimbursed medical expenses of over 10 percent of your adjusted gross income or 7.5 percent if you're over 65 years old
    • Health insurance premiums during unemployment
    • Back taxes

  3. Contribute after age 70 1/2.

    Traditional IRAs do not allow you to make contributions after you turn 70-1/2 years old. Instead, you must take distributions and pay taxes on those distributions.

    A Roth IRA includes no age limits for contributions. As long as you continue to earn income, you can contribute to the account and watch the total and your future financial security grow.

  4. Assist your heirs.

    Every Roth IRA includes an account beneficiary. Select an heir or multiple heirs who then receive tax-free income. This benefit is particularly attractive if caring for heirs or leaving an inheritance is an important part of your financial plans.

  5. Gain a back-door entry as a high earner.

    There are income limits to Roth IRA contributions that inhibit high earners from opening this type of account. However, you can open a traditional IRA and then convert those funds into a Roth IRA. A tax professional helps you make this conversion.
A Roth IRA provides five key benefits. Consider them carefully as you choose the best retirement strategy for your needs.
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