Saturday, August 1, 2015

The Roth IRA

The Roth IRA is just one of several retirement accounts available to help you in securing your financial future.

First, let’s mention some of the more important details of the Roth IRA:
  • Your contribution into the Roth IRA is post-tax money. You already paid income tax on the amount you are contributing (traditional IRA contributions are tax deductible and are taxed at the back-end when you withdraw your funds)
  • If you withdraw your income from a Roth IRA within 5 years of setting up the account, you will have to pay taxes and a 10% penalty
  • If you have not reached the age of 59 1/2 , you will have to pay taxes on the portion you are attempting to withdraw that represents earnings from your Roth contribution (dividends, interest, and capital appreciation)

Who can truly benefit from a Roth IRA? Well, I am of the opinion that if you can max out on putting your money into all the various retirement accounts out there, you should certainly do so. If you are limited to which retirement account you may finance, then I would consider what you believe your income will be when you hit your 60s.

Government employees typically earn a pension after a certain number of years working for their respective agencies. Depending on how the pension is structured, government employees can receive anywhere from 60%-85% of their highest income level at retirement until their death. A Roth IRA in this scenario will be ideal. In this scenario, you will be earning a fairly decent income which will result in a high tax bracket. The Roth will allow you to make withdrawals on a tax-free basis without being affected by your pension income.

The Roth IRA is beneficial for any individual who is of the impression they will make a reasonable amount of income late into their lives. If interested in being provided with an analysis on what the best retirement program may be for you, consider contacting a New York Estate Lawyer. Estate Lawyers can also provide you with other financial instruments to help you in controlling your financial assets such as drafting wills and trusts.

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