Roth IRA Retirement Plan

Roth IRA Retirement Plan

Secure your financial future with more information on Roth IRA – explore tax-free growth and withdrawals. Start your journey to a worry-free retirement by learning more about Roth IRA.

  • What is a Roth IRA?

    What is a Roth IRA?

    Welcome to the first chapter of our Roth IRA insight series! Discover the power of a Roth IRA as an effective tool for stashing away retirement funds with tax advantages. While it offers numerous benefits, it’s crucial to navigate the IRS rules and requirements governing its use, including those related to contributions, withdrawals, annual contribution…

Why would you want a Roth IRA in your retirement plan if you already own a traditional IRA? Quite simply, a Roth IRA uses after-tax dollars to build your retirement fund, so you pay taxes now while you’re employed. The money in a Roth IRA grows tax-free. Your withdrawals from it also incur no taxes in most cases.

Retirement Plan with Roth IRA

Adding a Roth IRA to your retirement plan makes good, logical sense. You can open a Roth IRA even if you already have a traditional IRA. You can either roll over the existing IRA into a Roth, or you can establish a separate account, paying into the Roth IRA annually.

Like other retirement account types, the Internal Revenue Service (IRS) caps the amount a person can contribute to a Roth IRA each year. However, the IRS allows individuals aged 50 and older to make larger catch-up contributions.

Avoiding RMDs and Taxes

Using a Roth IRA in retirement planning is a wise choice because it has no required minimum distributions (RMDs). You can let it continue to grow as long as you live.

Because they’re transferable, a person who maintains a Roth IRA can leave it as an asset to a beneficiary. It passes to the beneficiary intact, and any withdrawals the beneficiary makes also incur no taxes.

Combined, these benefits make a Roth IRA one of the most versatile retirement planning resources available. You don’t have to spend it, but if you do, you don’t pay taxes on the money. That means you could create one at any time, fund it, and hen use those funds to provide an income stream that won’t incur taxes.

Many individuals use the Roth IRA to bridge the gap between retirement and full Social Security benefits. If you wait until reaching the age of 70 to accept your Social Security benefits, the government provides a larger monthly payment. Some companies require retirement at age 65 or 67, so a Roth IRA gives those individuals tax-free income during those in-between years and beyond.

Options for Early Withdrawals

In some situations, an individual needs to withdraw money early. At Pathfinder Retirement, we recommend Roth IRAs because an account holder can make early withdrawals without penalty starting at age 59 and a half, as long as they open the account by age 54 and a half. Essentially, it vests in five years when you open it later in life. That makes it a handy choice for extra savings for retirement, since you won’t have as long of a wait to gain access to the funds.

This type of account also lets an individual withdraw earlier than that with a penalty. Any earlier withdrawals incur taxes and a fee equal to 10% of the withdrawal. The IRS provides exceptions to this fee, including first-time home purchases.

Find Out How a Roth IRA Could Serve You

Contact Pathfinder Retirement today to learn more about the retirement planning account options available to you. You don’t have to choose between a Roth IRA, Roth 401k, traditional IRA, and a 403b. In many cases, you can own more than one of these accounts and build a nest egg that provides tax breaks while you save and tax-free withdrawals once you retire. Let us help you leverage a Roth IRA in your retirement plan.

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