Retirement Plan Investment Consulting
Roth IRA
Roth IRA
1. Overview
- Funded with after-tax income; qualified withdrawals in retirement are tax-free.
- Subject to income limits (2025: Modified Adjusted Gross Income over $161,000 for singles or $240,000 for married filing jointly is ineligible to contribute).
2. Tax Benefits
- At Contribution: After-tax contributions; no tax deduction.
- At Withdrawal: Tax-free withdrawals of contributions and earnings (if qualified).
3. Withdrawal Rules
- Contributions can be withdrawn at any time without penalty.
- Earnings can be withdrawn tax-free if age 59½ or older and the account has been open for at least 5 years.
- No RMDs during the account holder’s lifetime.
4. Best For
- Those in a lower current tax bracket who expect a higher rate in retirement.
- Individuals seeking tax-free retirement income or estate planning flexibility.
Side-by-Side Comparison
| Feature | Traditional IRA | Roth IRA | SEP IRA |
|---|---|---|---|
| Tax at Contribution | Pre-tax, tax-deductible (may be limited) | After-tax, no deduction | Pre-tax, fully deductible |
| Tax at Withdrawal | Fully taxable | Tax-free (if qualified) | Fully taxable |
| RMDs | Yes (start at age 73) | None | Yes (start at age 73) |
| Income Limits | None (deduction may be limited) | Yes (high-income earners ineligible) | None |
| Contribution Limits (2025) | $7,000 ($8,000 if 50+) | $7,000 ($8,000 if 50+) | Up to 25% of compensation or $69,000, whichever is less |
| Best For | High current tax rate, expect lower in retirement | Low current tax rate, expect higher in retirement | Self-employed, small business, need higher limits |
Fair Investment Opportunity for Every Partners in Namerica
