Start a Roth IRA Now
January 18, 2021Greg Felton, CLU, ChFC, Sales Director
gfelton@nsslife.org
Annuities are great. Traditional IRAs are wonderful. But the Roth IRA is fantastic. A couple with joint earned income less than $206,000, could be eligible for a Roth IRA. It is important to get this plan started as soon as possible since one of the main tenants of this program is the five-year clock. The other important elements to get tax-free treatment with a Roth is the person must be at least age 59 1/2.
Here are the advantages of a Roth IRA. Contributions are not tax-deductible but if the rules are followed all interest may be tax-free after age 591⁄2. Annual contributions may be up to $6,000 per year and an additional $1,000 at age 50 or older. A married person age 60, making $14,000 per year could put $7,000 into their account and $7,000 into their spouse’s account if he or she is not employed. There are no RMDs on Roth accounts like there are on traditional IRAs. There is no final age either. So if people are working (gainfully employed) they can make deposits to this account.
Here are a couple of real-world advantages to having a Roth account. First, if you under age 591⁄2 and decide to take some money out of your Roth account; the principal or what you paid into the account may be withdrawn without incurring the IRS 10% early withdrawal fee. This fee is assessed on other annuities and IRA accounts but not the Roth account.
Another Roth advantage occurs later in life when collecting Social Security payments. Some portion of your SS payments will be taxable. The figure is calculated based on income. So, if you were taking money out of a traditional IRA this money would count against income and could cause you to pay more taxes on your SS income. However, withdrawals from a Roth IRA are tax free so it does not count against income.
One other consideration is a Roth conversion. This is when you take all or some of your IRA money and roll it over to a Roth account. You would owe in- come tax on any converted amount but after that your account could be tax-free. Certainly, something to consider especially with some dormant IRAs. How much money is sitting in a bank CD earning .25% or less?
It is simple to open a Roth IRA account with NSS. The minimum is $90 per month or $1,000 in the first year. After the initial deposit the account is flexible. More or less money may be added anytime.