Why you need a Roth IRA as a Home owner in Phoenix Arizona
1. You can open a Roth no matter how young you are, as long as you have earned income. Peter Anderson points out in his Roth IRA Movement contribution, 10 Reasons Why I Love the Roth IRA (And Why You Should Too): "There isn't an age limit to have a Roth IRA, so even your children can have one!" If you have a family business and your children contribute and receive compensation, a Roth IRA would be a perfect investment tool. That is really what makes the Roth IRA so unique, people of all ages can find a reason they should have one. Later we will cover the unique distribution allowances and you will see why. The process of opening a Roth IRA is really simple. Usually the fees for a Roth are minimal if any depending on the institution you feel most comfortable with. Most applications only require a Social Security Number for both you and the beneficiary, your employer information, withdrawal information and a signature. For information on the list of providers that we offer you can call me at 602.770.7063, Quest Capital is our broker dealer and has over 30 companies to choose from which makes the process even easier.
2. Most people have heard that when you purchase real estate you need to be focused on “Location, Location, Location. We have all have heard that…Right? Well in terms of investment option most people should be concerned with “Liquidity, Liquidity, Liquidity. The Roth IRA offers this. One thing life will offer you no matter where you are in life are obstacles. No one can determine the future so having investments that affords you the luxury of getting yourself into a better position is paramount. Roth IRA’s allow money to be withdrawn at any time and at any age, for any reason tax and penalty free. There are some rules that govern withdrawal penalties and taxation so let’s examine those.
Most contributions to a Roth IRA are after tax, which means that taxes have already been withdrawn from those contributions. And it's not just the contributions that come out tax-free. Uncle Sam doesn't lay a finger on any of the earnings. It can be a pretty sweet deal when you're talking about decades of compounding. However you can be penalized should you make distributions prior to age 59/1/2 and you could be taxed on the earnings if your withdrawals exceed your contributions within the first 5 years. Generally we recommend that you do not pull money out of your long term investments but there are cases when that is justified. There are situations that allow withdrawals to not have a penalty, we will cover those shortly.
3. "The greatest wealth is created by paying taxes when the rates are lowest," writes financial planner Michael Kitces in Roth vs. Traditional: The Four Factors That Determine Which Is Best. "If rates are low today and higher in the future -- e.g., for the young worker, or someone in-between jobs -- go with the Roth and pay taxes at today's low rates." Makes sense right…. Roth withdrawals in retirement are generally tax free, unlike payouts from traditional IRAs, which are generally taxed in your top tax bracket. This unique characteristic of Roth accounts is especially advantageous for young savers. When you're just starting out, you can assume (or at least hope) that your income will go up and you'll climb to a higher tax bracket in later years. So you're better off paying taxes on contributions now rather than on withdrawals later.
4. High-income earners can generally not make a contribution to a Roth IRA. The IRS has income thresholds that limit the size of the contribution that high earners can make. Above that threshold, direct contributions to a Roth IRA are disallowed. But there is a way around that. People who make a lot of money can make a nondeductible contribution to a traditional IRA and then convert it to a Roth. Many people in the industry have termed the phrase “opening a back-door Roth”. Everyone can do a nondeductible Traditional IRA and then convert it to a Roth. This just became a viable option for people who had built up assets in a Traditional IRA. However, the IRS does require you to take into consideration all your pretax holdings when figuring the tax liability of a conversion. Because it's complicated, it's best to consult a tax professional before attempting this maneuver.
5. You can withdraw all of your contributions and up to $10,000 of earnings to buy your first house, tax- and penalty-free, once the account has been opened for at least five years. Personal-finance blogger Kevin Mulligan writes at FreeFromBroke.com, "Because the Roth has its own special tax considerations (you contribute after you are taxed), it also has special withdrawal rules, which could be very beneficial to you." After your account has been open for at least five years, you're free to withdraw not only your contributions but also up to $10,000 of earnings income tax-free and without penalty at any age to buy your first home. Again, we wouldn't recommend stealing these funds from your future self. But this kind of flexibility is certainly an appealing quality of the Roth.
6. Unlike a 401(k), Roth IRAs give you more flexibility to maximize your contributions to the account each year. While you're still limited to $5,500 in annual Roth contributions, you get a 16-month window to fund the account. Perfect for procrastinators, the Roth IRA account type allows people to contribute to their Roth IRA right up until tax day of the following year. "For example, if I wanted to start a Roth IRA and fund it for 2014, I could do that right up until April 15, 2015, the day those taxes are due for 2015." The door for 2014 contributions to 401(k) plans, on the other hand, slammed shut on December 31, 2011. Haven't opened your own Roth yet? You could kick in $5,500 in 2014 contributions before April 15 and still add $5,500 more this year as your 2015 contribution. Call 602.770.7063 or email me at firstname.lastname@example.org for an easy set up.
7. You will enjoy greater freedom of choice with a Roth IRA than with a company retirement plan. A Roth IRA will usually have more investment options than your company 401(k), for which your choices would be limited to the funds selected by your employer. You'll be free to invest in stocks, bonds, certificates of deposit, mutual funds, exchange-traded funds and more, allowing you create an appropriately diversified portfolio.
8. And most importantly, even when you're gone, your Roth IRA will still live on free from taxation. You can pass your account funds on after you die, heirs get to receive this money in annual or lump-sum distributions in the same tax-free way that you would have. In addition, your loved ones could use the funds how you intended them to instead of having a tax obligation that wipes out 25% of the investment product. For example, if you left your family $400,000, those funds would be received in their entirety instead of taxed at current income. This at 25% would give $100,000 away in taxes. That is why I believe a Roth IRA is a perfect choice no matter what stage of life, whether you aspire to have a home or are retired and just want to keep the things you have accumulated.
Each situation is different but I sincerely encourage you to contact me as soon as possible with any questions you have and get one started today. My number again is 602.770.7063. We represent over 30 companies to choose from, and if you want a list of those companies please email me at email@example.com.
You can always contact Jayson Bates by emailing the show at firstname.lastname@example.org or calliing him directly at 602-573-3101