Now is the Time to Roth…

Jun 2, 2022

There are three good reasons to utilize a Roth IRA. We’ll get to the other two in a moment, at present let’s focus on the third, and I think the best.

First, a premise…

If you believe in America, believe that the future will likely be bright, if you have a long-term time horizon and are an optimist in general, then read on. If not, this is really not for you.

NOW is probably a good time to think about backing up the truck and load all you can into a Roth IRA because of bargain-basement stock prices. Stocks are on sale, it’s like BOGO at the local grocer. The gains you’ll likely get from buying now and holding over time should be substantial and tax-free.

It’s a more-money-in-your-pocket way to go.

A Roth IRA is funded with after-tax money, so there’s no initial tax deduction. There is, though, tax-free growth and no required minimum distribution.

“So what?” you might ask:

Well, anything can happen, but chances are good that an investment in a Roth IRA vs a traditional IRA in times like these is going to be a better option for your investment dollar.

For tax year 2022, you can contribute up to $6,000 to a Roth IRA, even if you are contributing to your company-sponsored retirement plan. If you are 50 or older, you can contribute up to $7,000. You must have earned income, and there are income limitations, for single filers up to $144,000 adjusted gross income and for married filing joint up to $214,000 adjusted gross income.

You can also convert IRA funds to a Roth IRA. Any funds converted will be subject to income tax in the year of conversion, but the balance will grow tax-free. There is a five-year rule distribution rule on most conversions.

Think about it, ask your Fee-Only Certified Financial Advisor™ if either a contribution or conversion makes sense for you.

Oh, and the other two times a Roth works well:

  • For the young. Compound interest kicks in a big way after twenty or so years, the longer you have to let it grow, the bigger the impact and the more money in your pocket at the end.
  • When you think your taxes in the future will be more than your taxes now.

All of this is highly individualized, and anything having to do with the IRS has dos and don’ts. Call me or any fee-only Certified Financial Planner™ to get your specific situation evaluated, we’ll answer your questions.