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.
Key benefits of a Roth IRA:
Contributions to a Roth IRA are not tax deductible, but they can be withdrawn tax free (this contrasts to a traditional IRA, in which contributions may be tax deductible and taxes are owed on withdrawals).
Unlike a traditional IRA, you are not required to start making withdrawals after age 70 1/2. If you don't need the money, the account continues to grow tax-free.
In addition, you can continue to put money into a Roth IRA after you reach 70 1/2 as long as the money comes from earned income, not investment income. Because you are not required to make withdrawals during your lifetime, a Roth IRA becomes an estate planning tool because you can pass your account intact to heirs.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $189,000 to $199,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $120,000 to $135,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range is now $0 to $10,000.
The maximum annual contribution to a Roth IRA is $5,500 for individuals and $10,000 for married couples for 2018. These limits are higher for individuals age 50 and older.
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.
Converting your traditional IRA to a Roth IRA may also provide more flexibility with your retirement funds.
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 $11,000) are used for the purchase of a first home or the withdrawal is due to death or disability.
Tax services are not offered through, or supervised by Lincoln Investment.
Today, you may no longer rely on just your company pension and Social Security to provide adequate funds for retirement. You may want to consider developing a retirement investment plan that makes maximum use of available tax benefits, so that your retirement assets may grow more quickly. If you meet the criteria, consider a Roth IRA. However, because the rules governing a Roth IRA are complex, you should work with a financial and tax professional.
Lincoln Investment has specialized since 1968 in providing retirement planning services. A Lincoln Investment financial advisor looks forward to working with you to explore the opportunities offered by a Roth IRA.