Taking the Fear Out of Finance with Laura F. Redfern, CFP®
7 Things You Should Know About… Roth IRA’s

Brush your teeth, eat your veggies, contribute to your Roth IRA… most of us would agree these are good things to do. And yet most of us, if pressed, would also admit that it’s sometimes difficult to be “good” about doing them consistently.

Just like a friendly nudge from your trainer to exercise, here’s a friendly financial nudge to fund a Roth IRA this year (don’t worry, this won’t be as difficult as sit-ups!):

  1. Potential for TAX FREE growth: under current regulation, earnings in a Roth IRA are NEVER TAXED. So whatever growth you see in your account is potentially tax-free: a rare and wonderful thing in the investment world.
  2. No Required Minimum Distributions: unlike other retirement accounts (tax-deferred IRA’s, 401k’s, 403b’s, etc.), Roth IRA’s do NOT require you to begin taking your money out at age 70 ½. Under current regulation, you could leave all of your Roth IRA money alone and never touch it during your lifetime. Which leads us to the next point…
  3. Estate planning tool: The Stretch IRA provision allows your beneficiaries the option to leave money in an inherited Roth IRA and let it continue to grow tax-free over the course of their lifetime.

**NOTE: all 3 of the above provisions could be changed if President Obama’s proposed budget is approved as-is. Most experts think it is highly unlikely that Congress would pass the budget as-is, but it is a point worth noting.

  1. A commonly misunderstood rule: You can continue to make contributions regardless of your AGE. Restrictions on contributions to Roth IRA’s regard your INCOME. For example, you must have earned income and it must be under the phase-out thresholds. But it doesn’t matter if you are age 15 or 95.
  2. In 2013, the limits were increased but few people seemed to notice. (I’ve even talked to other professionals who missed this one.) Contribution limits for 2013 and 2014 are: $5,500 under age 50 / $6,500 the year in which you turn age 50, and every year thereafter – subject to those income restrictions.
  3. You can contribute to a Spousal Roth IRA even if your spouse has no income (based on YOUR income). That means if you’re married and both of you are over age 50 in 2013, you could potentially contribute a total of $13,000 to your Roth IRA’s for tax year 2013.
  4. You have until April 15th 2014 to make a 2013 tax year contribution to your IRA. Think you missed 2013? Think again!

So there you have it… your Roth IRA workout is done! Did you break a sweat? If you’re experiencing any “sore muscles,” feel free to contact us with any questions or concerns.

Don’t have a Roth IRA? Why not? Give us a call and we can help you!




This material is not intended to replace the advice of a qualified attorney, tax advisor, or insurance agent. Before making any financial commitment regarding the issues discussed here, consult with the appropriate professional advisor.