Roth IRA is a lifetime investment - Ahwatukee Foothills News: Money

default avatar
Welcome to the site! Login or Signup below.
|
||
Logout|My Dashboard

Roth IRA is a lifetime investment

Print
Font Size:
Default font size
Larger font size

Related Stories

Posted: Tuesday, April 17, 2012 2:45 pm

Some investments are appropriate during your working years, while others are more suitable for retirement. But a Roth Individual Retirement Account (IRA) can provide you with benefits at virtually every stage of your life. Let’s take a quick “journey” through some of these stages to see just how valuable a Roth IRA can be.

To begin with, you can open a Roth IRA at any age, provided you have earned income and meet certain income limits. So if you’re just starting out in your career, put as much as you can afford into your Roth IRA and gradually increase your contributions as your income rises, up to the contribution limit. A Roth IRA is an excellent retirement savings vehicle because it can grow tax free and your contributions can be invested into just about any investment you choose — stocks, bonds, mutual funds, CDs, and so on.

Of course, when you’re young, you might not be thinking much about retirement. But the earlier you start contributing to a Roth IRA, the more you could end up with — and the difference could be substantial. In fact, if you started putting money into a Roth IRA at age 30, and you contributed the maximum amount each year until you reached 65, you would accumulate more than $766,000, assuming you are in the 25 percent tax bracket and you earned a 7 percent return, compounded annually. But, given the same assumptions, you’d end up with only about $365,000 if you waited until 40 before you started contributing.

It clearly pays to contribute early and annually to a Roth IRA (in 2011, the annual contribution limit is $5,000, or $6,000 if you’re 50 or older). There are additional benefits to funding a Roth IRA, such as its flexible withdrawal options, which are available to you even before you retire. Since you already paid taxes on the money you put into your Roth, you can withdraw your contributions at any time without paying taxes or penalties.

Generally speaking, it’s certainly best to leave your Roth IRA intact for as long as possible. But if there’s an emergency and you need access to the funds, you can also withdraw your Roth’s earnings tax free, provided you’ve held your account at least five years and you don’t start taking withdrawals until you’ve reached 59 1/2.

Now, let’s fast-forward to your retirement. Unlike other retirement accounts, such as a traditional IRA or a 401(k), your Roth IRA does not require you to start taking withdrawals at age 70 1/2 — or ever. If you don’t need the money, you can leave it alone, possibly to grow further, for as long as you like. This means that you might have more money to bequeath to your children or other beneficiaries, and they won’t have to pay income taxes on withdrawals from either your contributions or your earnings, provided your Roth IRA account has been open for at least five years. Keep in mind, though, that your beneficiaries will be required to take distributions based on their life expectancy.

As you can see, a Roth IRA can be an excellent financial “traveling companion” as you go through life. So consider adding a Roth to your portfolio — and bon voyage.

This article was written by Edward Jones for Cyndi Newburn, an Edward Jones financial advisor in Ahwatukee Foothills. Reach her at (480) 460-1149.

More about

More about

More about

  • Discuss

Stiff competition for new marijuana licenses in Arizona

Marijuana as a business in Arizona will grow, especially if voters pass Prop 205 and make recreational marijuana legal this November for peopl…

Published: August 23, 2016 - 6:48 pm @ http://www.fox10phoenix.com/news/arizona-news/1952…

Mayor Stanton And Phoenix Community Leaders Go Door-To-Door To Help High School Dropouts

Published: Tuesday, August 23, 2016 - 3:03pmUpdated: Tuesday, August 23, 2016 - 4:34pm downloadPhoenix Mayor Greg Stanton Tuesday joined a gro…

Published: August 23, 2016 - 6:17 pm @ http://kjzz.org/content/354778/mayor-stanton-and-p…

Feds to purchase 11 million pounds of surplus cheese

PHOENIX — The federal government has announced a plan to buy literally all the extra cheese. The U.S. Department of Agriculture said Tuesday t…

Published: August 23, 2016 - 5:47 pm @ http://www.usatoday.com/story/news/nation-now/2016…

Tucson Becomes an Unlikely Food Star

TUCSON — There are food deserts, those urban neighborhoods where finding healthful food is nearly impossible, and then there is Tucson. When t…

Published: August 23, 2016 - 5:47 pm @ http://mobile.nytimes.com/2016/08/24/dining/tucson…

Hundreds of applications pile in for Arizona medical marijuana dispensary licenses

PHOENIX, Az.– State officials say they received hundreds of applications for approximately 30 new licenses for medical marijuana dispensaries.

Published: August 23, 2016 - 5:46 pm @ http://www.thecannabist.co/2016/08/23/arizona-medi…

What’s Next For Canada’s First JW Marriott Resort

Toronto Hotel Toronto Hotel Hotel industry vet Michael Sneyd has launched his own firm and come on board at the JW Marriott in Muskoka to guid…

Published: August 23, 2016 - 5:46 pm @ https://www.bisnow.com/toronto/news/hotel/whats-ne…

Wanna play pro basketball? Phoenix Suns, D-League affiliate to host open tryouts

Wanna play professional basketball? Here's your chance. The Phoenix Suns and their NBA Development League affiliate, the Northern Arizona Suns…

Published: August 23, 2016 - 5:16 pm @ http://www.abc15.com/sports/sports-blogs-local/wan…

Jen Wahl TV - Timeline

See more of Jen Wahl TV by logging into FacebookMessage this Page, learn about upcoming events and more. If you don't have a Facebook account,…

Published: August 23, 2016 - 4:47 pm @ https://www.facebook.com/JenWahlTV/videos/11708911…

Wall Street’s Protection Racket: Mandatory Arbitration

By Pam Martens and Russ Martens: August 23, 2016  What people across Wall Street cannot figure out is why the Board of JPMorgan Chase, America…

Published: August 23, 2016 - 4:16 pm @ http://wallstreetonparade.com/2016/08/wall-streets…

Just 16 counties are fueling America’s use of the death penalty

Just 16 counties in the US are driving the use of the death penalty, despite a nationwide movement away from the sentence, a new report from t…

Published: August 23, 2016 - 3:46 pm @ http://www.businessinsider.com/16-counties-are-out…

Facebook

ahwatukee.com on Facebook

Twitter

ahwatukee.com on Twitter

RSS

Subscribe to ahwatukee.com via RSS

RSS Feeds

Spacer4px

Most Popular

Online poll

Loading…