Unlike a traditional IRA, Roth IRA contributions are made after-tax, but any money generated within the Roth is never taxed again. You can take withdrawals of contributions you’ve made to a Roth IRA before retirement age without penalties as long as the Roth requirements are met. If you are just starting out and think your income will grow, putting money in a Roth may be a great place to invest extra cash, while giving yourself an amazing future tax break.

How it Works

The Roth IRA was named for William Roth, a U.S. Senator from Delaware. He sponsored the Taxpayer Relief Act of 1997. A Roth IRA account allows you to save for retirement in a tax-advantaged way. Assets in a Roth IRA grow tax-free, meaning there are no taxes on dividends, interest or capital gains when you sell assets within the account or when you are withdrawing them during retirement, as long as the account has been in existence for 5 years and you are 59 ½. You place after-tax dollars into the Roth account, meaning qualified withdrawals of all contributions and earnings are tax-free!

Steps to Making the Roth IRA Work for You

So now that you have the basic concepts down, let’s look at the steps to making a Roth IRA work for you:

  • Decide if you want to invest for retirement using a Roth IRA
  • Determine if you are eligible for the Roth IRA based on the income limitations
  • Work with a Kades-Margolis Financial Advisor to determine what investment(s) you want in your Roth IRA and open an account
  • Start making after-tax contributions. When you’re ready, start withdrawing funds tax-free (as long as the account has been in existence for a minimum of 5 years)

When starting to save for retirement, an employer’s 403(b), 457(b), or   
401(k) is the first place to turn for tax-deferred growth, but a Roth IRA is also a great place to put away extra cash that you are saving for retirement or other life events. Remember contributions made to a Roth IRA can be withdrawn without penalty before retirement, and will not be taxed upon withdrawal as long as Roth requirements are met.

If you would like more information about a Roth IRA, please call
Kades-Margolis at (800) 433-1828, ext. 4, or here, fill out the form and submit. We will have one of our associates contact you.

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