Roth IRA
Candlefocus EditorA Roth IRA is an individual retirement account (IRA) that provides tax-free income for its owners during their retirement years. This type of account is especially beneficial for those who foresee their marginal taxes increasing in retirement. You pay taxes on money put into the Roth IRA, but all subsequent withdrawals are made without any additional taxation.
In 2023, individuals who are single and have an adjusted gross income (AGI) of $153,000 or less, can contribute the maximum of $6,500 a year to their Roth IRA (plus an additional $1,000 for those 50 and older). For married couples filing jointly, the limit rises to $228,000 in 2023. In 2022, the contribution limits were $6,000 per year unless you were 50 or older.
Because Roth IRAs are becoming increasingly popular, they are offered by almost all brokerage firms (online and brick-and-mortar), banks, and investment companies. The best way to open a Roth IRA is to research and compare companies to find the one that offers the fees and services that best meet your individual needs. It’s also wise to read up on the firms’ financial stability and customer satisfaction ratings.
If you are able to contribute to a Roth IRA, it can be an incredibly beneficial way to save for retirement. By making contributions to your Roth IRA now, you can reap the benefits of being able to withdraw your funds without incurring taxes while still receiving the principal back in retirement. With many contribution limits and filing statuses, it can be difficult to figure out exactly how much you can contribute to a Roth IRA. For these reasons, it is wise to consult with a financial advisor to ensure that you are making the best decision for your long-term financial goals.