With many looking toward retirement, the tune of growing your money in a tax-free account sounds pretty sweet, right? Roth IRAs as part of your retirement plan could be ideal – but knowing a bit about them can help you head toward your golden years in confidence and avoid some costly pitfalls.
Ineligibility. Roth IRA contributions are limited by income level, but you must have taxable income and your adjusted gross income must be less than a certain amount, depending on how much you make each year and how you file income taxes. The IRS sets these limits, which you can find at irs.gov/retirement-plans/individual-retirement-arrangements-iras
Not having one. Many believe you can’t have your cake and eat it too, but keeping your company’s 401(k) is totally cool, as you could still qualify to contribute to your Roth IRA.
Don’t overdo it. Putting in more money than your annual contribution limit allows may mean you are assessed for an IRS excise penalty.
Confirm beneficiaries. Know there’s a difference between “named beneficiaries” and “designated beneficiaries”. Forbes contributor Rob Russell writes, “…be specific. List their name, DOB, social security number, and address to avoid confusion and problems upon inheriting the Roth”.
Sources: https://www.forbes.com/sites/robrussell/2014/05/30/8-roth-ira-mistakes-to-avoid/#7f2f102a4369, irs.gov/retirement-plans/individual-retirement-arrangements-iras
