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Tom Meaglia, ChFC®, AEP®,
CLU®, CRPC®, MSFS
Chartered Financial Consultant
Investment Advisor Representative
Chartered Retirement Planning Counselor
CA Insurance Lic. #0567507
Meaglia Financial Consulting
2105 Foothill Blvd., #B140, La Verne, CA 91750
Toll Free: 800-386-3700
Bus: 909-593-6105
Cell: 818-681-8600
Fax: 909-593-6120
Email: tom@meagliafinancialconsulting.com
Website: www.meagliafinancialconsulting.com
What will your total taxes be over your lifetime? A Roth IRA could help you lower the number to this question’s answer.
If you’re like most people, you are more familiar with a traditional IRA. This retirement accumulation vehicle features tax-deferred contributions within certain income limits and tax-deferred potential growth. Distributions taken for hardship exceptions or after age 59½ for any reason are taxed at your ordinary income tax rate for the tax year it is withdrawn.
This type of IRA is particularly popular at this time of year, because you can make contributions up to the tax filing deadline and use potential deductions on your previous year’s tax return.
The Roth IRA is unique among qualified retirement plans and accounts. If you qualify by income, you can make Roth IRA contributions after-tax. Like a traditional IRA, a Roth IRA features tax-deferred potential growth. Now here’s the kicker: Distributions you take after age 59½, when you have owned the IRA for at least five years, are tax-free.
While most people assume their tax rates will be lower in retirement because they’re not working, who knows what tax rates will look like in the future? Another difference: Roth IRAs are not subject to required minimum distribution rules during the account owner’s lifetime. Distributions from traditional IRAs typically must begin by April 1 of the year following the year you reach age 70½.
If you expect to be in a higher tax bracket in retirement than you are now, or if you don’t want to guess what future tax rates might be, a Roth IRA might be for you. If you meet income limits, you might also consider converting all or some of a traditional IRA balance to a Roth IRA. Talk to a financial professional to learn more.
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