By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®

ROTH IRAs can be a powerhouse of tax benefit when the account enjoys compounded growth.  Here are six more facts that may surprise you.

1) You cannot be too young to contribute.  As long as you have earned income, age does not matter.  This was significant in our family when we gave our sons the opportunity to earn w-2 income beginning at 7 and 9 when we bought a golf driving range for them to run.  Their ROTH IRAs were opened the same year and they’ve been contributing each year since.

2) You can not be too old to contribute.  Unlike a traditional IRA, where the cut off is the year that you turn 70 1/2, there are no top end age limits to contribute to a ROTH.  I have clients who continue to work part time in retirement and enjoy socking away money into their ROTH accounts.

3) You do not have to take RMD’s at 70 ½.  Required Minimum Distributions must be taken from accounts that you’ve made pre-tax contributions to such as IRA’s as well as employer sponsored retirement accounts, including the ROTH portion of a 401(k).

4) Non-spouse beneficiaries must take RMDs from inherited ROTH IRAs.  ROTH IRA owners and spousal beneficiaries are not required to take distributions, even after age 70 ½.  However, if you inherit a ROTH IRA from someone other than your husband or wife, you fall under required distribution rules.  Distributions are not subject to ordinary income tax, however you will pay penalties if you do not follow the RMD rules.

5) Conversions to a ROTH IRA for most IRA owners are allowed regardless of income.  Unlike contributions, which are allowed only if your income is below a given threshold, (in 2018 for a full contribution, $189,000 for married filing jointly and $120,000 for single filers), conversions are allowed in any amount regardless of the money you earn.  You’ll pay ordinary income tax on the amount you convert, but you can convert any amount you wish.

6) The ROTH IRA got it’s name from it’s chief legislative sponsor, Senator William Roth of Delaware, as part of the Taxpayer Relief Act of 1997.

If you and your family members do not already own ROTH IRA’s, you may want to consider whether a ROTH IRA is a good option for you.  If you do own a ROTH, be sure you are making the most of it by considering your allowed contributions, possible conversions, the investments inside of the account, and understanding your distribution rules.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. You should discuss your specific situation with the appropriate professional before making any decision.

Future tax laws can change at any time and may impact the benefits of Roth IRAs.  Withdrawals from a ROTH account may be tax free, as long as they are qualified.  Withdrawals prior to 59 ½ or prior to the account being opened 5 years, whichever is later, may result in a 10% IRS penalty tax.  LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Financial Professionals and can be reached at (715) 343-9600 or [email protected]  www.SchulferAndAssociates.com  Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.