Why Do You Need a Roth IRA?

Everyone should have a Roth IRA

Learn how to use … 

Personal Finance | Finance Education
Roth IRAs

Offering tax free growth and withdrawals

A Roth IRA is a retirement vehicle that everyone should obtain if possible given your finances.  A Roth IRA is not tax deductible;  you will have to pay taxes on the income before putting your money into the IRA vehicle.  But once the money is invested, the Roth IRA allows your money to grow tax free over the entire lifetime AND allows you to withdraw the money tax free.  This is not true of 401Ks.  

Roth IRA is a retirement vehicle that allows you to 

  • Grow you retirement savings tax free
  • Withdraw the money in the IRA tax free

 Roth IRA rules dictate that as long as you’ve owned your account for 5 years and you’re age 59½ or older, you can withdraw your money when you want to and you won’t owe any federal taxes.

Yes!  You can own both an IRA and a 401K subject to your income limits.  As long as you don’t exceed the IRS’s income limits, you can still contribute the maximum annual amount to a Roth IRA.

You are allowed to contribute the following:

  • For the 2018 tax year, that’s $5,500, or $6,500 if you’re age 50 or older.
  • For the 2019 tax year, that’s $6,000, or $7,000 if you’re age 50 or older.

Yes! No taxes for your beneficiaries

You can pass your Roth IRA on to your beneficiaries, and their withdrawals will be tax-free.

You can get around the income limits for a Roth IRA but applying a Roth Conversion.  Note, however, that there may be tax consequences so consult with your accountant or attorney. 

To use this strategy, you’d start by placing your contribution in a traditional IRA—which has no income limits. Then, you’d move the money into a Roth IRA using a Roth conversion.  This strategy is permanent and cannot be reversed.

 

Learn About Long Straddles

Personal Finance | Retirement Vehicles

Benefits of the Roth IRA

A call option will benefit from :

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  • No Required minimum distributions ( RMDs ) for as long as you live
  • No age limit ( unlike traditional IRAs )
  • No employer-plan restrictions ( this is yours )
  • No taxes to your beneficiaries

  • The power of compounding will grow your investments tax free

Personal Finance | Retirement Vehicles

IRA Contribution Limits

RA contribution limits for 2019

  • If you’re under age 50  –  $6,000
  • If you’re age 50 or older  –  $7,000
  • Note: You can never contribute more than you’ve earned for the year.

Income Limits

Note that there are income limits

 

Contributing for a spouse

  • You can contribute to an IRA for a spouse who isn’t working (as long as you file a joint tax return)

     

  • The total contribution for both you and your spouse can’t exceed your joint taxable income or double the annual IRA limit, whichever is less. 

Contributing to a minor

 

  • Minors who want to start contributing to an IRA must abide by limits based on their income, not that of their parents.

Option Basics

Tips and Tricks

A short straddle option will benefit from :

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