May 19, 2014
A Roth IRA is a retirement savings vehicle that potentially allows for tax-free income in retirement. Roth IRAs can be an attractive vehicle for anyone looking to minimize their tax bill in retirement or to leave tax-free assets to their heirs. Although your contributions to a Roth IRA are not tax deductible like those of a Traditional IRA, qualified Roth IRA distributions are tax-free. Qualified Roth distributions occur when the IRA has been open for at least 5 years, the IRA holder is at least 59.5 years old, at the holder's death, due to disability, or in regards to a first-home purchase.
You are eligible to contribute to a Roth IRA as long as you have earned income from a job. There are income eligibility limits and if you make too much money, you cannot contribute to a Roth. The 2014 Income limit for single taxpayers is any income greater than $129,000, and for those who file jointly, the limit is any income greater than $191,000.
Another benefit to a Roth IRA is that you have access to your contributions at any time, for any reason, without paying tax or a penalty. Although your contributions are available at any time, earnings withdrawn before age 59 1/2 or before the account has been open for at least 5 years, may be subject to taxes and a 10% penalty.
If you have earned income, are within the income eligibility limits, and want to capitalize on the opportunity for tax-free distributions in retirement, a Roth IRA may be a perfect complement to your employer's retirement plan.
Ethan Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).