Retirement Plan: Quick Facts About Roth IRA Accounts

Becoming financially independent, growing a high-quality retirement, and coordinating a successful future is in the books for many, but the proper tools and guidance we utilize are far and few. I wanted to take a moment to share a couple of quick facts about Roth IRA accounts, since they are a well-known option for making YOUR MONEY WORK FOR YOU instead of for the banks! Meaning, instead of collecting a very small amount of return on your savings account (close to 0.05%) , why not put your money to WORK in a Roth IRA or 401(k) account and let it collect some return/profit? Out of the Roth and 401(k), we are going to take a quick glance at a Roth IRA account. I currently invest in a low risk, long-term package that shares approx 8-15% rate of return, depending on the market.

Below, you will find some simple yet informative facts about Roth IRA accounts and why we should all invest in some form of similar retirement plan:

  • There is NOT an age cap for depositing your contribution (adjusted gross income must be below a designated amount). You can contribute throughout your entire lifetime (even after 70 ½). Most of us should begin our account around 21-25 years of age. If you are opening you account after then, try to max-out your account to hit your retirement goals in a proper timeline.
  • You CAN contribute to your Roth IRA, as well as your 401(k) retirement plan. You can even max-out or cap-off both of them. (I would recommend seeing if your employer provides a 401(k). If so, see if they match any designated amount. Then consider contributing to that as well to at least meet the requirement for the matched amount.)
  • When it comes to deducting when filing taxes, you can NOT deduct your contributions, as they are an already taxed form of income. Understand that this is already taxed money. But, you will not be taxed on the back-end when you acquire your “profit” from your returns.
  • You DON’T have to pay any penalties, taxes, or fees when pulling from your Roth IRA account contributions early (must be the contributions, not profit from rate of return).

There is an annual contribution limit depending on your filed income from the previous year.

(View amount you could file for tax year 2020).

Sources:

https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras

https://www.irahelp.com/slottreport/5-roth-ira-facts-may-surprise-you