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Suncoast Investment ServicesAt Suncoast Investment Services, we are committed to providing a high level of service that stands apart from the rest. Our team of professionals is comprised of a diverse group of individuals who collectively have decades of experience in the financial services industry. We offer comprehensive wealth management and retirement planning strategies. At Suncoast Investment Services, we take serving our clients to heart. We put your needs ahead of our own and provide sound financial advice that we ourselves would follow. It is our pleasure to work side by side with our clients, ensuring that each unique situation is addressed. Your financial plan should be as individual as you are, and at Suncoast Investment Services, we make sure of that. Retirement planning is one of our specialties.
What is a Roth IRA?A Roth IRA is a kind of individual retirement account (IRA) that allows individuals to withdraw funds tax-free pending specific qualifications has been met. Similar to traditional IRAs, the most significant difference is how and when the funds are taxed. Roth IRAs are funded with after-tax dollars. Contributions made to a Roth IRA are not tax-deductible like their counterpart, a traditional IRA. When you begin to receive distributions from a Roth IRA, the money is then considered tax-free.
Roth IRA Contribution LimitsRoth IRA contribution limits may change each year. Every year, the Internal Revenue Service evaluates and sometimes alters the contribution limits for a Roth IRA and other kinds of retirement savings vehicles. Only earned income can be contributed to Roth IRAs. Your income amount may also restrict your eligibility to contribute to a Roth IRA. Once an individual reaches age 50, contribution limits become more flexible, allowing for catch-up contributions or contributions over the usually permitted amount.
Roth IRA RulesRoth IRAs are generally a great way to save for retirement and sometimes are even more sensible than a traditional IRA. However, they do come with rules. This kind of retirement account allows your funds to grow tax-free. Under certain conditions, the Roth IRA allows tax-free withdrawals. The requirements include becoming aged 59 ½, becoming disabled, or using the funds for a first-time home purchase. Roth IRA rules cover contribution limits, income restrictions, and how/when you can withdraw your funds. In 2020, withdrawal rules on Roth IRAs were updated.
Roth IRA vs. Traditional IRARoth IRAs are funded with after-tax dollars.Contributions made to a Roth IRA are not tax-deductible. When qualified withdrawals begin, the funds are then tax-free.Traditional IRA deposits are made with pre-tax dollars. Taxes are paid upon withdrawal at retirement.Traditional IRAs are similar to personal pensions in that there are considerable tax breaks, but there are restrictions to fund accessibility.Roth IRAs are more like regular investment accounts, except they have tax benefits. There are fewer restrictions but fewer tax breaks as well.A Roth IRA is usually best for individuals who expect themselves to be in the same or lower tax bracket at retirement.A traditional IRA can work for someone who expects to be in a higher tax bracket at retirement.Both Roth and traditional IRAs can suit different retirement savings needs.Basically, the differences between a Roth IRA and a traditional IRA involve considering whether you want to owe the IRS now or later. Accessibility of funds and eligibility standards differ as well. Speaking with your financial advisor about maximizing your retirement contributions and diversifying your investments is crucial in saving for retirement and mitigating tax liability.
Key TakeawaysNo matter where you are in your financial journey, it is never the wrong time to save for retirement. Now is as good a time as any. There is no such thing as too late or too early to save for retirement. The sooner you begin, the better. A financial advisor will help you navigate the many complexities involved in retirement planning. At Suncoast Investment Services, we take a comprehensive approach to financial planning. We are consistent and committed to our clients. Call a financial advisor today to get yourself on the right track to the kind of retirement that you envision.