Should I consider a Roth IRA even if I can’t write it off?



I believe the Roth IRA is the most powerful savings vehicle on the planet for retirement savings. Not everyone qualifies for a Roth IRA due to their Adjusted Gross Income (AGI), but for those that do, its something each of them should strongly consider. Consider the power of tax free growth. There is a big difference in tax fee and tax deferred. Under the traditional IRA structure, an individual contributes and gets to write off the amount contributed against their taxable earnings for the year. Those contributions and future growth then grow tax deferred until retirement. At retirement, those monies are then taxed as they are taken out in retirement and are taxed at the tax bracket you are in at retirement. However, under the Roth IRA structure, the money goes in after tax but the future growth isn’t only tax deferred, its tax free.

Theoretically, if you turn a $5,000 contribution into a portfolio that 20 or 30 years later is valued at $200,000, all that growth from the original $5,000 investment is tax free when you take it out. Under the traditional IRA structure, all the gain on that initial investment would be taxed. That’s a huge difference. A large part of investing is later being able to keep as much of the gain as possible. The Roth allows for incredible potential.

Remember: You have till April 15th, to make your prior year IRA contribution.

*The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

The opinions voiced in this article are for general purposes only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

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