A Roth IRA allows tax-free withdrawals after retirement. Learn more below and start planning today.
What is a Roth IRA?
A Roth IRA (Individual Retirement Account) is a personal retirement savings account that allows tax-free withdrawals of both contributions and investment gains after age 59½. Unlike traditional employer-sponsored plans like 401(k) or 403(b), Roth IRAs are self-managed and offer flexible investment options.
Although you don’t get a tax deduction upfront, the biggest advantage is that you won’t pay any taxes when withdrawing your money later, making it an excellent long-term retirement strategy.
Key Benefits of a Roth IRA
- Tax-Free Withdrawals: After age 59½, both your contributions and earnings can be withdrawn completely tax-free.
- Flexible Contributions: You can withdraw your contributions anytime without penalty.
- No Required Minimum Distributions (RMDs): No mandatory withdrawals in retirement.
- Estate Planning Advantage: Beneficiaries can inherit assets tax-free.
Eligibility for Roth IRA Contributions
You must have earned income, and income limits apply. In 2024, married couples filing jointly must have MAGI under $230,000 to qualify for full contributions. High earners can use a Backdoor Roth IRA strategy.
What is a Backdoor Roth IRA?
A Backdoor Roth IRA allows high-income earners to contribute indirectly by funding a Traditional IRA and converting it to a Roth IRA.
Roth IRA Contribution Limits
As of 2024:
- Under age 50: $7,000 per year
- Age 50 and above: $8,000 with catch-up contribution
Your contributions cannot exceed your earned income.
How to Open a Roth IRA
Open an account online via Vanguard, Fidelity, Charles Schwab, or TD Ameritrade.
Additional Insights: Spousal IRA & Dual Contributions
- Spousal IRA: A working spouse can contribute on behalf of a non-working spouse.
- Traditional + Roth IRA: You can contribute to both, but total contributions must stay within the annual limit.
Conclusion
A Roth IRA is a tax-efficient and flexible retirement savings tool. Start building your financial future today.
