Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
The Roth IRA is designed to supplement retirement income. Since retirement can extend 20 to 30 years past retirement additional income is often needed. Many experts say you’ll need 70 to 100 per cent of your pre-retirement income in retirement. Inflation will erode the buying power of your retirement income and must be considered.
Pension plans may not replace the amount of pre-retirement income necessary. The taxation on pension benefits and traditional IRA accounts can also erode the buying power of these qualified pension plans.
A Roth IRA is made with after-tax money. There aren’t any age limits on participation and they can be paid in addition to contributions made to your employer-sponsored plan. Contributions can be made on behalf of a non-working spouse. Regular adjusted gross income limits apply.
The Roth IRA premium is coordinated with traditional IRA premiums and is reduced at higher adjusted gross income levels. Currently the maximum contribution possible to a Roth IRA is $5.500 when you are under age 50 and $6,500 per year when you are 50 years old and older.
When a Roth IRA is more than five years old it can be used for retirement, tax-free. After five years the Roth IRA can be passed to heirs tax-free. You can use the money in a Roth IRA at any time for qualified education expenses without the normal 10% early distribution penalty tax. You can withdraw up to the total of your payments without income tax or the additional 10 percent penalty tax.
With a Roth IRA you have access to your earnings. You can withdraw earnings income tax free and without the additional 10 penalty tax if you have had the Roth IRA for at least five years and are over 59.5 years, disabled or are using the money for a first-time home purchase.
It pays to start your Roth IRA as early as possible and fund it as fully as possible. Because all gain in the Roth IRA is not currently taxed there is a significant compounded rate of return. This will help develop your financial well-being.
One of the key considerations is taxation. With a Roth IRA contributions are made with after-tax dollars. The money received in retirement is paid in tax free dollars. If you are currently in a very high tax bracket, the Roth IRA might not be the best choice, however, if you are in a fairly low tax bracket you will find that receiving the money tax free in retirement makes good sense.
Most retirement programs are subject to mandatory distributions that start at age seventy and a half. These force you take money out of a plan and pay current income tax. A Roth IRA is not subject to a mandatory distribution and that inconvenience and expense is not required.
In the final analysis, tax-free money is great. By carefully planning expenditures you can use the tax-free money to keep you in a lower tax bracket in retirement and potentially save a great deal of money.
The money in your other pension plans is actually jointly held by you and the government. With the Roth IRA, it is all yours.
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Pension plans may not replace the amount of pre-retirement income necessary. The taxation on pension benefits and traditional IRA accounts can also erode the buying power of these qualified pension plans.
A Roth IRA is made with after-tax money. There aren’t any age limits on participation and they can be paid in addition to contributions made to your employer-sponsored plan. Contributions can be made on behalf of a non-working spouse. Regular adjusted gross income limits apply.
The Roth IRA premium is coordinated with traditional IRA premiums and is reduced at higher adjusted gross income levels. Currently the maximum contribution possible to a Roth IRA is $5.500 when you are under age 50 and $6,500 per year when you are 50 years old and older.
When a Roth IRA is more than five years old it can be used for retirement, tax-free. After five years the Roth IRA can be passed to heirs tax-free. You can use the money in a Roth IRA at any time for qualified education expenses without the normal 10% early distribution penalty tax. You can withdraw up to the total of your payments without income tax or the additional 10 percent penalty tax.
With a Roth IRA you have access to your earnings. You can withdraw earnings income tax free and without the additional 10 penalty tax if you have had the Roth IRA for at least five years and are over 59.5 years, disabled or are using the money for a first-time home purchase.
It pays to start your Roth IRA as early as possible and fund it as fully as possible. Because all gain in the Roth IRA is not currently taxed there is a significant compounded rate of return. This will help develop your financial well-being.
One of the key considerations is taxation. With a Roth IRA contributions are made with after-tax dollars. The money received in retirement is paid in tax free dollars. If you are currently in a very high tax bracket, the Roth IRA might not be the best choice, however, if you are in a fairly low tax bracket you will find that receiving the money tax free in retirement makes good sense.
Most retirement programs are subject to mandatory distributions that start at age seventy and a half. These force you take money out of a plan and pay current income tax. A Roth IRA is not subject to a mandatory distribution and that inconvenience and expense is not required.
In the final analysis, tax-free money is great. By carefully planning expenditures you can use the tax-free money to keep you in a lower tax bracket in retirement and potentially save a great deal of money.
The money in your other pension plans is actually jointly held by you and the government. With the Roth IRA, it is all yours.