When it comes to unhindered retirement investment vehicles, consider a Roth IRA, according to one financial expert.
“I actually think the Roth IRA is like a golden egg,” Sun Group Wealth Partners CEO Winnie Sun recently told Yahoo Finance Live. “If you qualify, I think you should make a strong contribution every year.”
Calling it her “first way” into retirement savings for people of any age, ”Sun said that if your annual household income exceeds the limit,“ go through a conversion to Roth ”from a traditional IRA with the help of a tax accountant.
Individuals earning less than $ 125,000 per year or married couples who jointly apply and earn less than $ 198,000 can contribute up to $ 6,000 per year (or $ 7,000 if they are 50 or older) with a Roth IRA. “If you earn more than the Roth IRA’s salary cap, you can always contribute to a traditional IRA,” which does not come with maximum earnings.
Part of the Roth IRA’s appeal is that it allows savers who have open accounts for at least five years to attract savings before retiring, the Sun explained. The account is financed in dollars after tax, so withdrawals are not taxed. Earnings are also not taxed if the funds are used to withdraw qualified funds.
One such qualified withdrawal is to buy a first home. Roth IRA savers can “raise up to $ 10,000 for a purchase,” which can be applied to an advance or closing costs, and comes with tax benefits like non-payment of “income tax or early withdrawal fees”.
Another qualified withdrawal is a withdrawal made by the beneficiary or your property after your death.
The Roth IRA is “a great way to move assets from one generation to another,” the Sun said, provided savers have “enough income and savings” to financially support their golden years.
Given that Roth IRAs do not have the necessary minimum allocations or RMDs, such as traditional IRAs, money can continue to grow and be left to future generations who will “inherit the tax breaks of non-taxable allocation” provided they withdraw within five years, she said.
Other withdrawals are made when you are 59½ or older or if you have a permanent disability.
An unqualified withdrawal – or one that does not meet these criteria – can be taxed and could trigger a 10% early withdrawal penalty.