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Sound Advice: October 16, 2024

Why a Roth IRA is a good choice for savings

A Roth IRA is a great retirement savings option for several reasons:

Tax-Free Growth and Withdrawals

The primary benefit of a Roth IRA is that your contributions and earnings grow tax-free, and you can withdraw them tax-free after age 59½, provided you've had the account for at least five years. This means you pay taxes on the money going in, but all future withdrawals are tax-free, which can result in significant tax savings in retirement.

Flexibility

Unlike traditional IRAs, Roth IRAs allow you to withdraw your contributions (but not earnings) at any time, tax- and penalty-free. This provides greater flexibility for managing your finances.

No Required Minimum Distributions

Roth IRAs don't have required minimum distributions (RMDs) during the owner's lifetime, allowing your money to continue growing tax-free for as long as you want.

Estate Planning Benefits

Roth IRAs can be an effective tool for estate planning, as they can be passed on to heirs tax-free.

Contribution Limits

For 2024, the contribution limits for Roth IRAs are as follows:

  • $7,000 for individuals under age 50
  • $8,000 for individuals age 50 and older (includes a $1,000 catch-up contribution)

It's important to note that these limits apply to the total contributions across all your IRAs (both Roth and traditional).

Income Limits

Roth IRA contributions are subject to income limits. For 2024:

  • Single filers: Full contributions allowed if modified adjusted gross income (MAGI) is under $146,000. Contributions phase out between $146,000 and $161,000.
  • Married filing jointly: Full contributions allowed if MAGI is under $230,000. Contributions phase out between $230,000 and $240,000.

If your income exceeds these limits, you may still be able to contribute using the backdoor Roth IRA strategy. In summary, a Roth IRA offers tax-free growth and withdrawals in retirement, flexibility, and estate planning benefits, making it an attractive option for many investors. Even so, it's important to consider your current and future tax situation when deciding between a Roth and traditional IRA.

In summary, a Roth IRA offers tax-free growth and withdrawals in retirement, flexibility, and estate planning benefits, making it an attractive option for many investors.

Before getting started, remember that it's important to consider your current and future tax situation when deciding between a Roth and traditional IRA.

 

N. Russell Wayne

Weston, CT  06883

203-895-8877

www.soundasset.blogspot.com

 

 

  

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