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Roth IRAs

Roth IRAs

Roth IRAs were legislated in 1997 and are named after the late Senator William. Roth from  Delaware. There are some similarities with traditional IRAs and some significant differences.

Similar to traditional IRAs

  • 2017 & 2018 maximum contribution is $5,500
  • Those  50 and older can contribute an additional $1,000 in 2017 & 2018. The $5,500 maximum contribution and catch up provision apply in the aggregate for the IRAs that an individual is eligible to contribute in a given year.  In other words, a person can not make multiple $5,500 contributions to different IRAs. The $5,500 can be contributed in total to all eligible IRA accounts.
  • Contribution must be completed by April 15 following the tax year in which the contribution is reported to the IRS.

Differences in comparison to traditional IRAs

  • Roth IRA contributions are non-deductible and qualified distributions will be tax free.
  • Qualified distributions must meet certain criteria to be taken tax free.
  • Roth IRA contributions are available to the owners for distribution without penalty.
  • Eligibility to make contributions is based on Adjusted Gross Income (AGI) in the year of the contribution.

Make a financial plan for your retirement

  • Estimate your retirement expenses.
  • Catalogue available resources for retirement
  • Determine priority order of accessing catalogued retirement assets
  • Calibrate the rate at which to draw down the retirement assets

Manage retirement assets

  • Allocate assets, include stocks and bonds
  • Rebalance at least annually
  • Consider time period to retirement and time period through retirement
  • Consider risk tolerance

Planning for retirement is daunting, but “failing to plan is planning to fail” and no one wants to fail in retirement.  Take action!