3 Roth IRA Considerations

There is no better way to secure your financial future than by taking advantage of the tax benefits offered by a Roth IRA.  These retirement accounts do not allow you to deduct contributions up front, but enable you to make tax-free withdrawals in retirement.  Before opening a Roth, learn the associated rules and limits.  Here are a few things to know:

• Mind the Cap.  If your annual income is in the six figures, you may not be eligible to contribute to a Roth, because the IRS limits the use of Roth IRAs to those whose income falls below a certain threshold. 
• Tax Breaks.  Roth IRAs do not offer an up-front tax break, so benefits of tax-free withdrawals can only be realized if your tax rate will be higher in retirement than it was when you were working. 
• Health History.  By choosing a Roth IRA instead of a traditional IRA, you are assuming that you will live long enough to enjoy the tax benefit of those tax-free withdrawals.  It is important to consider your health and your likelihood of living decades into retirement, especially if you will be relying on Roth IRA withdrawals for income.

See Todd Campbell, 3 Things You Should Consider Before Contributing to a Roth IRA, The Motley Fool, Feb. 28, 2015.