Time to Consider a Roth?

02J78820With interest rates close to zero and a newly received refund check in hand, you may wish to consider a contribution to a Roth IRA.

The Roth IRA basics

Using after-tax funds, you can contribute up to $5,500 each year in a Roth IRA. If you are at least 50 years old, you can contribute an additional $1,000. As long as your Roth IRA has been open for 5 years or more and your withdrawal of earnings occurs after 59½ years old, any earnings you receive from this account are yours tax-free.

The benefits

1 Tax-free earnings. Unlike other retirement accounts, Roth IRA earnings are not taxed by the Federal government when withdrawn.
2 Keep contributing. Most other retirement accounts have a contribution age limit of 70½. When you reach this age you not only need to stop contributing to the account, but you are required to make a minimum withdrawal from the account each year. These limits do not exist for Roth IRA accountholders.
3 You can withdraw your contributions. Remember with a Roth IRA, your contributions were already taxed. So there is no penalty for withdrawing these funds. Just remember there can be a penalty for withdrawing any earnings before you reach age 59½ or before having the account for five years.
There are limits
If you earn more than $132,000 (single) or $194,000 (married filing joint) you are not allowed to make a Roth Contribution in 2016. You can, however, convert funds from a traditional IRA without these income limitations.