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Retirement Planning

Roth IRA

The Roth Individual Retirement Account is a retirement investment plan that offers another option for people to invest for retirement. It is popular because of the benefits it offers.

The decision to open a Roth IRA should be based on a number of factors, such as your age, current income tax rate, expected income tax rate in retirement, how many years you will invest and the expected rate of return. To help you analyze these often-complicated factors, it makes sense to seek the help of an investment professional.

Features and Benefits of a Roth IRA

Key benefits of a Roth IRA:

Contributions Grow Tax-Deferred

Contributions to a Roth IRA are not tax deductible, but they can be withdrawn tax free (this contrasts to a traditional IRA, in which contributions may be tax deductible and taxes are owed on withdrawals).

Withdrawals Not Mandatory During Your Lifetime

Unless you are a beneficiary, you are not required to make withdrawals from your Roth IRA. A Roth IRA becomes an estate planning tool because you can pass your account intact to heirs.

Who can make Roth IRA contributions in 2024?

The Adjusted Gross Income (AGI) phase-out range for taxpayers making contributions to a Roth IRA is $230,000 to $240,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $146,000 to $161,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range is up to $10,000.

Contribution Levels

The maximum annual contribution to a Roth IRA is $6,500 for individuals for 2024. These limits are higher for individuals age 50 and older.

Conversion Opportunities

As an investor with a traditional IRA, you may be able to benefit by converting it to a Roth IRA. There are no income limits restricting who may convert a traditional IRA to a Roth IRA. However, the rules governing conversions to a Roth IRA are complex and should be discussed with your Lincoln financial professional.

Tax-Free Earnings

Earnings can be taken out tax-free and penalty-free if a Roth IRA has been held for at least five years and you meet one of the following: You are over the age of 59 1/2, the funds (up to $10,000) are used for the purchase of a first home or the withdrawal is due to death or disability.

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