The Benefits of a Roth IRA

Retirement

The Benefits of a Roth IRA

Posted by RDW Financial Group
5 months ago | July 14, 2017

For most people, accumulating a sizeable nest egg is their primary retirement planning goal. Some accomplish this goal so well, that they even move up an income bracket once they retire! That’s mostly a good thing, of course, but it might pose a bit of a challenge for your income tax situation.

If you use a traditional tax-advantaged account, such as a 401(k) or IRA to save for retirement, you know that you earn a valuable income tax deduction from your contributions each year. That’s great for now, but then your withdrawals will be taxed as regular income in retirement. For those in higher tax brackets, this can pose a problem.

Wouldn’t it be nice to enjoy some tax-free income in retirement? That’s exactly what a Roth IRA (Individual Retirement Account) is designed to accomplish.

When you save money via a Roth IRA, the money you contribute is already taxed (as opposed to pre-tax contributions in a traditional retirement account). The money will grow in the account with all taxes deferred, and your distributions in retirement won’t be taxed either.

Sound like a good idea? There are two ways to fund a Roth IRA. The first is to simply open that type of account and begin making contributions.

The second avenue is to take your traditional IRA, and roll part or all of the money into a Roth account. This can be a complicated maneuver though, so we don’t recommend that you attempt it before seeking experienced counsel.

As with all retirement planning options, a Roth IRA comes with certain benefits and drawbacks. Before you leap into action, give us a call first and we’ll discuss your plans. We can explain, in more detail, how this type of account works. If you decide a Roth IRA is right for you, we can help you take the next step.

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