Financial Insights

Roth IRA

A Roth individual retirement account (IRA) is a personal savings plan that offers certain tax benefits to encourage retirement savings.

Contributions to a Roth IRA are never tax deductible on your federal income tax return, which means that you can contribute only after-tax dollars. But amounts contributed to the Roth IRA grow tax deferred and, if certain conditions are met, distributions (including both contributions and investment earnings) will be completely tax free at the federal level.

A Roth IRA, like a traditional IRA, is not an investment, but a tax-advantaged vehicle in which you can hold some of your investments. You need to decide how to invest your Roth IRA dollars based on your own tolerance for risk and investment philosophy. How fast your Roth IRA dollars grow is largely a function of the investments you choose.

For 2013, you can contribute up to the lesser of $5,500 ($6,500 if you’re age 50 or older) or 100 percent of your taxable compensation to a Roth IRA.

You may also be able to contribute up to $5,500 to a Roth IRA in your spouse’s name even if he or she receives little or no taxable compensation ($6,500 if your spouse is 50 or older). However, not everyone qualifies to use the Roth IRA. Even if you do, you may not qualify to contribute the annual maximum. The amount you can contribute to a Roth IRA (if any) depends on your modified adjusted gross income (MAGI) for the year and your federal income tax filing status.

Contact us today to help you with your retirement planning questions.  Manuel A. Martinez is a CERTIFIED FINANCIAL PLANNER™ focused on helping families and small businesses in the Charleston and Mount Pleasant South Carolina area.  We provide hourly financial planning services and asset management services.

The following information is reprinted with permission from Forefield, Inc. Copyright 2006-2013.

If you have questions or concerns about your financial strategy give us a call at 843-628-2892 or use our contact form.