Broker Check
Is Roth IRA for Me?

Is Roth IRA for Me?

March 01, 2021

Is a ROTH IRA for me?


As a financial advisor for over 16 years, there are many questions that I get from clients about retirement, about saving, and about insurance.  One of the most common questions that I receive pertains to whether a ROTH IRA is a good choice as an investment and how can it be used to improve my retirement income platform.  Here are 5 reasons I share with my clients.

  • Access. A Roth IRA gives you the ability to access your contributions without incurring any type of penalty or income tax.  You have already paid tax on those contributions, so pulling them back out, without accessing your gains, will allow you to utilize the benefit of its value immediately, regardless of your age. 

  • Tax Free Growth. The Roth IRA is one of few investments that allows you to grow your money without having to pay tax on gains.  That means I don’t pay any taxes along the way and will not have to pay additional tax in the future when I seek to take a withdrawal.  As long as I follow the rules, like waiting 5 years from when I established the account and being over the age of 59 ½ before I pull money out, I will have access to 100% of the value without owing any additional money to “Uncle Sam.” 

  • Use for College. The Roth IRA gives you money that can be used for college and for retirement.  I tell people all the time, you can borrow money to go to college, but you can’t borrow money to retire.  So using the Roth IRA gives you some flexibility to be able to pull money out to send “Junior” to college without the burden of a long term financial aide obligation.  Your contributions are accessible without penalty.  Your growth or interest will avoid the 10% penalty but you will have to pay tax on that gain.

  • No Required Minimum Distributions (RMDs). As of December 2019 under the SECURE Act, RMD age was increased to age 72 for withdrawals on any IRA or 401K.  The Roth IRA has no requirements to draw money out at any particular age.  So, you can allow this to grow all the way through your date of death.  This will open up many opportunities for your legacy planning and for your golden years income planning.

  • No tax consequences at your passing. With taxes and inheritance being a big concern for many, securing a tax advantaged investment to pass on to the kids and grandkids is always important.  The Roth IRA transfers, by beneficiary, to the next generation without income taxes needing to be paid.  Your beneficiary will be subject to a 10 year RMD schedule if it is reinvested in an inherited-Roth IRA, but it will still never be subject to a 10% penalty or income taxation.

There are many savings vehicles available to everyone, a Roth IRA may be a great fit for you.