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Apply for Roth IRA and Have Tax-Free Withdrawals

Roth IRA has guaranteed tax-deferred earnings and tax-free withdrawals to its customers.
Roth IRA has guaranteed tax-deferred earnings and tax-free withdrawals to its customers. (Photo: military.com)

If you are looking for a retirement plan that is secured and flexible, well, look no further and consider applying for Roth IRA.

According to Marca, Roth IRA offers tax-deferred earnings and tax-free withdrawals. Any 18 years old and above can apply if they qualify for the earned income limit.

Also Read: Senior’s Social Security: Significant Increase for Beneficiaries This 2023 

Advantages of a Roth IRA

Flexibility

You can make periodic or one-time contributions as long as you do not exceed the annual maximum limit.

No minimum distribution

Roth IRA guarantees a tax-free withdrawal; hence you do not have to worry about tax consequences.

No taxes on inherited accounts

If you pass your Roth IRA to an heir; the heir would also not pay any taxes

Easy tax-free withdrawals

You can withdraw the money whenever you want, without taxes or penalties.

Dual Contributions

You can also open two accounts: one ROTH IRA retirement account and a 401(k) account

Contributions to Roth IRA have increased to $30,000 and $22,50 for the 401 (k) plan.

Contributions to Roth IRA have increased to $30,000 and $22,50 for the 401 (k) plan. (Photo: IRA Financial Group)

Find Out: President Biden Signed a New Withdrawal Rule: Beneficial for Wealthy American Seniors 

More: IRS Update 2023: IRA Contribution Limits and 401(K) in 2023 – Here’s What You Should Know

Contributions limits for 2023

Your contribution limit will depend on your income. But you can save more as the contribution limits are adjusted for inflation each year. According to Marca,  the maximum Roth IRA contribution for the 2023 tax year has been increased to $7,500 for those aged 50 and above.

If you want to open a 401(k) plan, your contributions will increase to $22,500 per year, which means you can save $2,000 or more. On the other hand, you must have an income below $153,000 to contribute to a Roth IRA. If you are 50 or older, you can make contributions of up to $30,000 per year which will open more opportunities to save for your golden years.

However, you can use the “back door” strategy if you have a higher income for Roth IRA. Vanguard says you can use this strategy by contributing to a traditional IRA, which has no income limit. Then, transfer the money into a Roth IRA using a Roth conversion. Take note; you must understand the tax consequences as a Roth conversion is permanent.

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