If you’re somewhat familiar with investing, you may know that the Roth IRA is a great retirement-savings vehicle.
To understand why this is so, it’s necessary to be familiar with a Roth IRA’s features. When you contribute to a Roth IRA, your earnings have the potential to grow tax free, provided you don’t start taking withdrawals until you’re 59½ and you’ve had your account at least five years. The amounts you contributed aren’t taxed when withdrawn because you’ve already paid taxes
on the money you put in. The potential for tax-free earnings can continue even when your beneficiaries inherit your Roth IRA, though you’ll need to consult with your tax advisor on this issue.
A Roth IRA also offers other features that can help you build resources for retirement while possibly helping your surviving family members. You can contribute to your Roth IRA for as long as you have some earned income, up to the contribution limits, and as long as you meet certain income limitations. If you’ve officially “retired,” you might do some consulting or part-time work. So you could put some of your earnings into your Roth IRA. This ability to keep funding your Roth IRA virtually indefinitely can give you more flexibility in managing your retirement income — and, depending on how you do manage that income and what your other objectives may be, you may also end up with more money that could be left to your beneficiaries.
Unlike a traditional IRA or a 401(k), a Roth IRA does not require you to start taking minimum distributions at age 70½. You are never required to withdraw money from your Roth IRA. By leaving your account intact for as long as possible, you’ll potentially have more money available for a variety of options — one of which may involve leaving sums to your beneficiaries. Your non-spouse beneficiaries must take annual required minimum distributions, but they have the option to take the distributions over their lifetime.
When you invest in a Roth IRA, your goal, first and foremost, is to help fund your retirement. Basically all your decisions regarding your Roth IRA — how much to contribute, where to invest the money and when to begin taking withdrawals — should be based on your own retirement goals. However, as a side benefit to investing in a Roth IRA, you may find that you could help out the next generation, or two, of your family.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.Information provided by Tim Hanstad, Edward Jones financial advisor, 5525 Merle Hay Road, Johnston, 278-2525.