November 22, 2019

3 Ways to Boost Roth IRA Savings

3 Ways to Boost Roth IRA Savings

Outside of saving in your employer’s retirement plan, there are two types of Individual Retirement Accounts (or IRAs) – Traditional and Roth.  In a traditional IRA, your contributions are tax-deductible now but are taxed on withdrawals in retirement. In a Roth IRA, your contributions are taxed now but your withdrawals are tax-free.

Depending on your current tax rates and where your rates will be in retirement, it can make sense to build up the balance in one type of account over the other.

Roth IRAs provide more flexibility in retirement since distributions come out tax-free. In addition, Roth IRAs do not have required minimum distributions like traditional IRAs.

Here are three ways to increase your Roth IRA:
  1. Contribute to a Roth IRA.  The contribution limit is $6,000 in 2019 with an additional $1,000 catch-up contribution for those over 50. The income limit for the full contribution is $122,000 for single filers and $193,000 for married filers. The maximum contribution amount begins to phase out after these levels.
  2. A Backdoor Roth contribution. If you do not have a balance in any traditional IRAs, you can contribute to the traditional IRA and shortly after moving those funds to a Roth IRA. This gets around the income limits from the first option. The key is to move your IRAs into your employer’s retirement plan by the end of the year (12/31), so you do not have a balance on IRAs.
  3. Roth Conversion. This can make sense if you have a traditional IRA and happen to be in a lower income year than you expect to be in the next few years or in retirement. You can convert your assets from your traditional IRA to Roth IRA assets by recognizing the income today. There is not a limit on conversion, it only depends on how much income you want to recognize without bumping up into a higher tax bracket. Income limits do not apply either. When you take distributions in retirement, they will be tax-free.

Having both traditional IRA and Roth IRA assets is smart for more flexible spending and tax options during retirement.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Marcum Wealth, or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Marcum Wealth.  Please remember to contact Marcum Wealth, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Marcum Wealth is neither a law Firm, nor a certified public accounting Firm, and no portion of the commentary content should be construed as legal or accounting advice.  A copy of the Marcum Wealth’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request. Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your Marcum Wealth account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Marcum Wealth accounts; and, (3) a description of each comparative benchmark/index is available upon request.