Question:
Hello. I am an avid reader. Thank you for the information you provide. About opening/establishing a Roth IRA:
I opened my 1st and only Roth IRA on April 12 of 2018 at the age of 59 ½, funding it with an initial deposit and designating that deposit as a 2017 deposit/contribution. In August of 2018 I made a 2nd deposit as my 2018 Roth IRA contribution. Does the 5-year rule (to withdraw earnings tax free) begin in 2017 or 2018? Does the 5-year rule start on April 12, the actual date of the Roth IRA establishment, or does the date default to January 1st regardless of the actual establishment date?
Thanks again,
Jeff
Answer:
Jeff,
The start date for your Roth IRA is officially January 1, 2017.
Roth IRAs and Roth 401(k) plans are incredibly popular, and why wouldn’t they be? Both offer tax-free earnings and allow the account owner to pass tax-free dollars to their beneficiaries. However, despite the ubiquity of Roth accounts, there are some common misunderstandings about how Roth IRAs and Roth 401(k)s operate and interact with each other. Confusion swirls around such basic concepts as contribution limits, eligibility and Roth rollovers.
For example, income limits apply to Roth IRA contributions only There are no income limits for designated Roth 401(k) plan salary deferrals. Contributions are the initial building block of Roth IRAs.
Roth IRAs are a wonderful way to save for retirement. A person can sock away $6,000 a year (plus another $1,000 if they are age 50 or older) and the earnings will grow tax free. Plus, most custodians allow Roth IRA dollars to be invested in an incredibly wide array of options – mutual funds, stocks, ETFs - a veritable smorgasbords of choices. Can’t beat that with a stick!
Did I mention that Roth IRAs have no required minimum distributions at age 70 ½? (Put that in the “pro-Roth” column.) What about age restrictions on who can contribute? You’re telling me that anyone can contribute to a Roth IRA as long as they have earned income and do not exceed certain income limits?
Question:
I set up a Roth outside my employee retirement plan. I retired on 10-01-2018. I set up an automatic contribution to my Roth IRA from my checking account and, up to this day, still continue to contribute to the Roth IRA . Shall I opt out since I’m retired now? Your advice is deeply appreciated.
Thank you very much.
Sincerely,
Ester
Answer:
Hi Ester,
Contributing to a Roth IRA in addition to your employer plan is a great way to increase your retirement savings.
