Updated: Oct 28, 2019
In the past private companies would set aside money for their employees to live off over their retirement, it was called a pension plan. Now most companies are changing with the economy and have replaced their pension plan plans with 401K's, 403B's, or 457 plans. A Roth IRA can help you supplement your workplace retirement plan. Some people don't have a retirement plan at work so a Roth IRA (Individual Retirement Account) is essential.
A Roth is an Individual Retirement Account that allows you to pay taxes on the money you put into it upfront. This is a good thing, because we all know one thing, taxes are going up and this investment protects your money from being taxed later at a much higher rate. The growth in your account and any withdrawals you make and take after age 59 1/2 are Tax Free as long as you've had the account for more than 5 years. BOOM!!! Because you were taxed upfront, you don't owe in retirement.
Opening up a Roth is super simple. Visit your bank's website and fill out their online application. If your bank doesn't offer one, there are plenty on line that do.
This is what you'll need to complete the process:
1. Your drivers license, passport or some other form of government issued ID.
2. Your Social Security number
3. Your bank's routing number and your checking or savings account number (on the bottom of your checks)
4. Your employers name and address (optional)
5. You will also choose your beneficiary(s) who will inherit your Roth IRA. You will need all of their important personal information as well, name, birth date, SSN.
Roth IRA income and contribution limits for 2019:
Married filing jointly or a qualifying widow(er):
Less than $193,000, a max of $6,000/yr ($7K. if 50 or older)
$193K- $202,999, Contribution is reduced
$203,000 or more, Not Eligible
Single Head of Household or married filing separately:
Less than $122,000, a max of $6,000/yr ($7K. if 50 or older)
$122K- $136,999, Contribution is reduced
$137,000 or more, Not Eligible
Along with the Pros of the Roth there are some Cons, here are two obvious ones, the lack of immediate tax breaks for those that are looking for one and a low maximum contribution amount.
Remember, this is your long term investment tool. Set it up to automatically invest, have it withdraw your investment amount every month directly from your bank account so that you can set it and forget it. You need to leave it alone and watch it grow. Don't flinch when the market goes through it's normal highs and lows. Historically in the broad world of investing, what goes down eventually comes back up.
Think long term when your investing in your future. Start investing today, watch your nest egg grow and Never Flinch!