This January marks the 20th anniversary of the Roth IRA. First made available to investors in January of 1998, a Roth IRA is an individual retirement account funded with after-tax dollars that provides tax-free growth and income for retirement.
Because Roth IRAs are such an important part of many people’s retirement income plan, I have decided to make 2018 The Year of The Roth.
Roth IRAs offer a ton of benefits including tax-free growth and distributions in retirement. For example, someone who may have saved a million dollars in their traditional IRA may only pocket about half that amount after factoring in state and federal income tax.
The beauty of the Roth IRA is that it allows you to contribute after-tax dollars, which grow tax-free until you need the money during retirement. Even then, all distributions are free from tax as well. For retirees who are trying to manage their taxable income to stay below certain threshold amounts, the Roth IRA is an invaluable tool.
In plain English, this means that assuming equal account balances, a Roth IRA is worth as much as twice as much as a traditional IRA when it comes to your after-tax retirement income.
Many other IRA experts agree. “I am a big proponent of Roth IRAs, as contributions today lead to tax-free money in retirement, when you need it most,” said Ed Slott, CPA, founder of Ed Slott and Company and a nationally-recognized IRA expert who was named “The Best Source for IRA Advice” by The Wall Street Journal. “Unfortunately, the rules surrounding these retirement accounts are as confusing as ever, so it is important to work with someone who specializes in them.”
As a member of Ed Slott’s Elite IRA Advisor Group℠, an exclusive membership group dedicated to the mastery of advanced retirement account and tax planning laws and strategies, I attend semiannual live training events and have year-round access to Ed Slott and Company’s team of retirement experts for consultation on advanced planning topics.
Over the next 12 months look for additional content devoted to the Roth IRA and its close sibling the Roth 401k.