10 Reasons You Need a Roth IRA
1. Tax-free growth and withdrawals• Roth IRA
withdrawals in retirement are tax-free.
• Traditional IRA contributions can be tax-deductible now, but withdrawals in retirement are taxed as income.
flickr/ 401(k) 2012
2. No required minimum distributions
• Unlike traditional IRA accounts, which require withdrawals by age 70-½ , Roth IRA accounts don’t require you to take money out until you’re ready.
• Theoretically, you could let your money compound tax-free until you’re 100. Flickr/ Steven Dipolo
3. Leave your money to heirs tax-free• Roth IRAs can be
passed on to your heirs, who can take either a lump sum or periodic distributions tax-free.
• The account must be at least five years old to prevent heirs being taxed on the account’s gains.
Flickr/ steakpinball
4. Withdrawals not included in MAGI• When you withdraw from
a traditional IRA, the money counts in your modified adjusted gross income.
• Roth withdrawals don’t count in MAGI.
• This could help you stay in a lower tax bracket and help you avoid things like the Medicare surtax on investment income.
5. Withdraw your contributions at any time
• Unlike a traditional IRA or 401(k), you can withdraw your Roth IRA contributions (but not gains) tax- and penalty-free at any age, and for any reason.
• With other accounts, a 10% early-withdrawal penalty can be assessed. Flickr/ OTA photos
6. Contribute as long as you work
• You can make contributions to a Roth IRA so long as you have earned income, even if you’re past “retirement age.” Flickr/ kdothq
7. Take advantage of your lower tax bracket now
• If you’re young, chances are your income will rise over your working life, putting you in a higher tax bracket when you retire.
• Therefore, it could be to your advantage to pay tax on your income now and get tax-free withdrawals later, when you’re in a higher tax bracket.
Flickr/ 401(k) 2012
8. 16 months to contribute• You have until the tax
deadline (April 15) to contribute to your Roth IRA for the previous tax year.
• This benefit goes for all IRAs, but it’s worth knowing.
• So, if you’re starting late, you have extra time to maximize your 2014 contributions.
Flickr/ efile989
9. Income is not (really) a factor in eligibility
• While you need to earn less than a certain income amount to contribute directly to a Roth IRA, anyone can convert a traditional IRA to a Roth IRA at any time, regardless of income.
• Check out this article for full details on how to accomplish this.
10. Choices, choices, choices!• Unlike most
company-sponsored retirement plans, IRAs allow you to invest in virtually any stock, bond, or mutual fund.
• Some brokers will even let you use options and futures in your IRA accounts.
Wikipedia/ deerstop
How to boost your income in retirement