Tom Meaglia, ChFC®

Chartered Financial Consultant


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Meaglia Financial Consulting

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January/February 2020

Check Out the Roth IRA

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If you don’t qualify for a tax-deferred traditional IRA because your income is too high or if you would rather not bet on federal income taxes being low in the future, when distributions would be taxed, you might want to look at a Roth IRA to help with your retirement strategy.

Who Qualifies?
Your contributions to a Roth IRA are made after-tax, in contrast to pre-tax contributions you may make to a traditional IRA if you qualify by income. In return, you don’t pay income tax on distributions if you are at least age 59 1/2 and have owned the Roth IRA at least five years. You also aren’t required to begin minimum distributions (RMDs) during your lifetime, which you must with a traditional IRA at age 70-1/2.

Anyone can contribute to a traditional IRA, but annual income determines your eligibility for a Roth. In 2019, the limit was $203,000 in modified adjusted gross income if you file a joint tax return and lesser amounts for other filers. There is no income limit for rollovers from a traditional IRA, but you will pay income tax on the rollover amount, so it may be best to do this in years when you have lower income.

One similarity between the two IRAs is that potential growth is tax-deferred. Withdrawals from a Roth IRA become tax-free once you meet the holding requirements.

Why this Works
If you’re young and unsure how much money you’ll need in retirement, and especially if you believe income tax rates will be higher in the future, a Roth IRA may be for you. Older workers may also prefer a Roth IRA for a few reasons. First, the obvious: tax-free distributions. Second, you don’t have RMDs, which may be important if you have other retirement income. Third, you can continue contributing to a Roth after age 70 1/2 if you have earned income. You can’t do that with a traditional IRA.

Pay taxes now or pay them later? Talk to your financial professional to help you make that choice.


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Investment advisory services offered through Fusion Capital Management, an SEC Registered Investment Advisor. 9111 Cypress Waters Blvd., Ste 140, Dallas, TX 75019.
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