Retirement Savings Strategies with a Roth IRA

While saving for retirement is a subject you hear often, many people don’t take advantage of all the opportunities available to them. One of the hot topics for some time is the Roth IRA and how the growth on investment earnings isn’t taxed during retirement. Here’s some additional information about a Roth IRA that you may want to consider:

• To qualify for a Roth, you must have “earned income” in the year you want to make a contribution.

• Contributions are not taxed, nor are they tax deductible, since they are made from post-tax income.

• You can contribute up to $5,500 in 2014 ($6,500 if you’re age 50 or older) if you have earned at least that much in earned income.

• If your spouse doesn’t work, and you file a joint tax return, you can contribute to their IRA.

• Unlike a traditional IRA, there are no required distributions for a Roth IRA – you can leave those funds in the account for as long as you live.

• You can continue to make contributions after age 70-1/2.

• Roth IRA withdrawals are not included in the Medicare MAGI calculation.

• You can contribute to a Roth IRA while participating in a company 401k.

• Withdrawals made after 59-1/2 are not taxed but funds must have been in the Roth IRA at least five years prior. This could play an important role in managing your tax liability if you are depending on income from other sources that are taxable.

• If withdrawals are made before age 59-1/2 and are only up to the amount that has been contributed then no income tax is charged. In other words, withdrawals of the contributions are tax free.

• Tax free withdrawals before age 59-1/2 can be made for qualified higher education expenses and first time home buyers can withdraw up to $10,000.

• Contributions to a Roth IRA can be invested in a variety of choices including individual stocks, bonds, ETFs and more.

• As long as your Roth IRA account is opened by December 31, you have up until April 15 of the following year to make a contribution.

It’s important to note that there are upper income limits that may prevent you from contributing to a Roth IRA. Also, you may be able to make tax-free withdrawals for additional hardship reasons. Be sure to discuss your specific situation with a qualified financial advisor to determine if a Roth IRA is right for you and how best to invest those funds.