When planning for retirement, 2 of the main types of IRAs are Traditional IRAs, which is pre-tax money, or Roth IRAs, which is post-tax money. Contributions to either account can be made until April 15th of next year and still apply to this year’s limits.
If you are ineligible to contribution directly to a Roth account due to income limitations, you can contribute money first into an IRA, and the convert the money to a Roth account. If you have money currently in an IRA, these assets can also be converted into a Roth account.
The benefits of a Roth account are numerous, including the potential for a tax-free retirement! Tax is paid on the money before it is contributed into the account and then the money invested within the account grows tax-free. Withdrawals taken after 5 years and age 59 ½ are considered tax-free!
Tax laws surrounding conversions from a traditional IRA to a Roth IRA are subject to change, so it is important to take advantage of this strategy. Give my office a call for any questions you may have about IRAs, Roth IRAs, conversions or planning for a tax-free retirement!