February 28, 2015

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Roth IRA at Retirement

What Happens to Your Roth IRA When It Is Time to Retire?

A Roth IRA is a great option for many reasons, but many people wonder what to do with their account when it’s time to retire. Before you can begin to process what to do with that part of your retirement funds, it’s important learn a few things about the benefits a Roth IRA offers. Then we can tackle what happens to your Roth IRA when it’s time to retire.

Withdraw What You Need As You Need It

The Roth IRA does not require withdrawals to begin at a certain age. This means you can withdraw what you need, for example if you need a deposit for new home loans, and leave the rest in the account. This can be very beneficial because it gives your money the chance to continue growing. You may want to take money out on a yearly or monthly basis, depending on your needs. More importantly, if you have other retirement funds that do require withdrawals, you can use these funds before ever touching your Roth IRA. Imagine how much your money could grow if left in the account for another 10-15 years.

Rework Your Portfolio

If you’re going to leave money in your Roth IRA, and you certainly should, you need to rework your portfolio. If you haven’t done so already, you should reinvest your money into less risky stocks. This will help ensure that the money will still be there once your other sources of retirement funds have been used. While you can do this on your own, it’s nice to have a professional help you make the decisions. Note that he should HELP, not MAKE the decisions. You should always have a hand in making the final decisions so that you know where your money is going.

Consult an Accountant About Withdrawals

Taxes on a Roth IRA can be tricky and you should definitely consult your accountant when making withdrawals. Some distributions are taxable, while others aren’t. For example, earnings from the account are tax-free after the age of 59 1/2 only if the account is over 5 years old. Distributions from regular contributions (not conversions) are also tax-free.

A Roth IRA is a great option for those just starting to save for retirement and those that want to convert their traditional IRA. The ability to keep the money in the account gives retirees the upper hand as their reworked stocks continue to earn money. However, it’s important to discuss withdrawals with your accountant to make sure they are tax-free.

Roth IRAs are for the Self Directed Investor

There are a number of advantages that Roth IRAs have over other retirement accounts such ordinary Roth IRAs and 401Ks. These advantages generally fall into the category of catering self motivated and directed and motivated individuals. So if you have this type of general temperament and business approach, this alone may be a reason to try out this type of investment vehicle and retirement account. Let’s take a look at some of the ways that Roth IRAs work well with someone with a self directed and enterprising character.

Large Choice of investment Options

In terms of simple investment options alone Roth IRAs offer many more choices than 401Ks and traditional IRAs. With the latter, the bank or your employer offer you a limited range of investment avenues, while with a Roth IRA you can incorporate stocks, mutual funds, CDs, bonds, real estate, business partnerships, equity, and so on, all at your own prerogative. This puts you, rather than some financial institution or employer, in the driver’s seat.

Tax Advantages

The well known tax advantages of a Roth IRA tend to work in the favor of independent minded people. Though you can’t make contributions to the account tax deductible, when you withdraw profits from the account they are not subject to capital gains tax. This means that you are encouraged to use the money that you have earned rather than merely wait until it accrues to some predetermined level at a later time. Self directed individuals will appreciate this advantage because it means that they can have access to their money when they determine it is the best time.

Ease of Use

Traditional IRAs require that contributions to the account be reported to the IRS as tax deductions. This means extra time and hassle for the owner of the account. However, with a Roth IRA no such reporting is necessary since the contributions are not tax deductible. This is a quid pro quo type of situation: you give up the right to deduct the contributions from your taxable income for the advantage of being able to withdraw them, in increased form, later on without a capital gains tax. This means there is no extra tax paperwork to take care of and it makes the account easier to use in general. It frees up your time to put your attention on other goals, whether they are to start a business, to take a vacation, to stop smoking, or to take up painting.

Fewer Restrictions

There are fewer restrictions on a Roth IRA account than on ordinary IRAs. An example is that you can avoid things like early distribution penalties and minimum distributions, which are the types of restrictions you may find with traditional IRAs. Again, this gives the account holder greater freedom and mobility with their money and this fits well with an independent and self directed approach.

In view of all this, you may want to consider a Roth IRA if you consider yourself an individual who is comfortable with a fairly high level of personal freedom and self generated control as regards your financial decision making.

Considerations for Selecting Individual Stocks for a Roth IRA

If you know anything about Roth IRA’s you’re probably aware that there are a number of options for the investments that make up the portfolios of these retirement accounts. There are common stocks, bonds, mutual funds, and CDs. Often a Roth IRA will be diversified among a number of these different investment types. People who have experience specifically with picking winning stocks may wish to handle their choice of stocks to include in the Roth IRA and even focus exclusively on stocks, ignoring the other investment types. This is a bit of a riskier and more maverick approach than having, say, a diversified portfolio that is managed by a fund manager. It can prove more profitable, especially when good stock choices are put together with the tax advantages of a Roth IRA, but generally you really need to know your stuff.

The following are some criteria you should meet if you wish to purchase individual stocks for your Roth IRA account.

Understanding of Stock Market Basics

If you’re going to pick winning stocks, at the very least you need a good understanding of stock market basics. This applies to ordinary stock investing, of course, as well as stocks for Roth IRA accounts. Much of what appears to be advanced knowledge is basic knowledge that is fine tuned and tempered with experience. With this in mind, get a good fundamental knowledge of stocks that can then be made more sophisticated as you learn how stocks work in the real market.

Willing to Research Stock Investments

Man stock purchase choices that are made in the context of a Roth IRA are made by the mutual funds managers or stock brokers hired by banks and not by the individual him or herself. This is at least in part due to the fact that the owner of the Roth IRA often doesn’t have the time to carefully research the wide range of stock choices available. So if you are going to pick your own stocks for the IRA, you’re going to need to acknowledge this extra time demand of looking into the background of stocks you are considering and making sure they are the right choices.

Good Decision Making Ability

You also need to be decisive and skilled at making decisions. There is always uncertainty in the stock market and the only way to balance this out is by having a certain amount of confidence in your own ability to assess the right stock choice decision in a reasonable amount of time. There are emotional factors involved with this as well as intellectual and experience based ones.

General Business Experience

General business experience is also very helpful here. The Roth IRA can be thought of as a type of business. Managing a stock portfolio is in many ways akin to running a business in that you need assess the entirety of the undertaking of trying to earn profits with your stock choices. Gains need to be weighed against any banking costs and fees as well as average losses of stock value to arrive at a sense of how well your Roth IRA business is doing at a given time and what its profit margin is.

Ability to Choose Stocks that Exceed Market Averages

Finally, you simply need to have the consistent ability to choose stocks that do better than the market average. Even fund managers can find it challenging to beat market averages. This should be your goal. If you don’t achieve this, there is little purpose in choosing your own stocks. If the extra time put into choosing stocks doesn’t result in profits that exceed that which a fund manager would be able to show, then why take this route? The whole purpose of the Roth IRA is to make money that you can use both now and after retirement and you’re going to need to do just that with it in order to demonstrate that the Roth IRA is worthwhile. Just know that penny stocks is a whole different thing and we will need a whole guide on that topic.

To conclude, it is possible to increase your Roth IRA profits by focusing on the stock market and making stock choices yourself, but it is not something that just anybody should necessarily do. There is knowledge and experience involved and in order for this approach to be worthwhile, you need to make consistently good stock decisions. So take all this into consideration before employing this Roth IRA investment approach.

2011 Roth IRA Rules

Know the Roth IRA Rules for 2011

roth ira rule changes

Roth IRA Rules

The rules for your Roth IRA have changed for the upcoming tax season, so be sure you understand the rules before you begin to file your taxes. Each year the rules will change, so you need to keep up with them to avoid any issues when you file your taxes.

Age Rules

This kind of IRA has limits on age, unlike many other investment accounts you might be familiar with. The age rules have remained the same since 2010; you can begin to withdraw at 52 without a penalty, and you must still be 18 to start your own Roth account. If you’re not, a parent can open one for you and you can contribute to it with your own earnings. There are still no distribution limits to your Roth IRA, so you only have to take out the money when you want to, and not when the IRS tells you to. [Read More...]

Holding Liquid Assets in Roth IRAs

Using Cash Wisely in a Roth IRA

roth ira retirement


While you can hold investments like stock and bonds in your Roth IRA, you should hold cash too. The value of the dollar is constantly fluctuating and you can get ahead of a downturn by investing now when the dollar still has worth. You won’t make any money by holding cash in your checking account (and not much in your savings or money market account), but you will get a better return on your cash in an IRA.

Turn Your Cash into Precious Metals [Read More...]

Are You Eligible For a Roth Ira

Roth Ira eligibility

Roth IRA Eligibility

Everyone is different and every situation is different too! You need to make sure that you’re eligible for the advantages (and disadvantages) that a Roth IRA provides investors who make under $122,000 ($177,000 for couples) every year. While your income might change over the years, it’s best to take advantage of lower tax brackets while you have them! But are you eligible for the Roth or should you go with the traditional IRA account?

How Old Are You? [Read More...]

Roth IRA Checklist

Finding the Best Roth IRA

check list for roth ira

Checklist for Retirement

Everyone who wants an IRA needs to be sure they’re getting the best deal. But how do you know the dealer, broker or institution offering your Roth account actually is as good as they seem? How are you sure that something will be done right, and that you funds won’t evaporate over night? It’s your money and you’re working for it, so you need to make sure that you can make your money work for you and keep it for as long as possible. [Read More...]

Understanding Compounding Wealth

Understanding the Magic Behind Compound Interest and Your Roth IRA

Saving money while you’re young doesn’t seem important, but it really is; with a Roth IRA you’ll be able to save for the future without much effort. But the big key to saving is interest, and if you can leave your IRA account alone interest will continue to accrue every year at 8%. Over the life of 40 years, your IRA will multiply by 8 times, and if you put in enough there’s no limit to what you can achieve!

How Compound Interest Works [Read More...]

Roth IRA Calculators

How to Get the Best Rate with a Roth IRA Calculator

While many people just run and gun with their Roth IRA accounts, sometimes you need a little more than you might think. With a calculator, you’ll be able to find out exactly how much you’ll need to contribute annually, how much you can withdraw at a later date to still save money for your retirement, and of course how much you’re actually going to get back on your investment later. Let’s get started!

Understanding Your Compound Interest [Read More...]

Five Things You Have to Know

Three Facts about Roth IRAs You Need to Know

Before you make any investment in a Roth IRA, you need to know how it can help you save for retirement or for the future and what it doesn’t do for you. One of the best way to arm yourself for a secure financial future is to understand how things work, so keep reading!

You Only Pull Out Money When You Want to

One of the best features about a Roth IRA is that you can choose when you start withdrawing money when YOU want to, not when the IRS tells you to. This means you can start saving for your children’s retirement if you like, and they can inherit it later on and do what they want with it. You can just keep saving over the years and take distributions from your account tax free (since it’s funded by income that you’ve already paid taxes on) when you need it. [Read More...]

What Makes a Roth IRA different

Understanding the Differences Between Roth IRAs and Traditional IRAs

When you’re looking for the best way to invest your money, you will have to decide between Roth IRAs and a traditional IRA. Social Security isn’t a given like it was in the past; IRAs allow you to save for retirement, and with more and more companies no longer offering pension plans it’s your responsibility to start saving for yourself. Here I’ll show you how you can choose between the two. [Read More...]

Opening A Roth IRA

Everything You Need to Know to Open Your Roth IRA

Roth IRAs are a great tool to start saving for retirement, but you need to make sure that you invest your money in the right fund and know how to get started. Here we’ll talk about what you need to do before you even think about investing in a Roth, and how to get it started.

Be Secure Before You Start

  • Pay off your debts before you begin to save
  • Have a savings account with at least one month of income in it for emergencies

Before you start, you have to make sure your major debts are paid off and of course that you have money saved somewhere else that’s easier to get to. The last thing you want is to have an emergency that you can’t get help for because it can take a while to pull money out of your IRA. Savings accounts are there for a reason, make sure you use them! [Read More...]

What Kinds of Investments for IRAs

Investing Wisely in a Roth IRA

Every time you earn money on your stocks, bonds or mutual funds, you should put some of the money aside into your Roth IRA (or IRAs if you have more than one). One of the most important things a person planning for their future can do is to save now and save often. Compound wealth happens over time, and you won’t get rich if you take too many risks. [Read More...]

Using Roth IRAs with 401k

Add a Roth IRA to Your Existing 401K Plan

Adding the benefits of a Roth IRA to your existing 401k plan can help you allows you to make tax free contributions to your retirement while your employer matches it up to a certain amount. A Roth 401K allows you to keep a separate account from your traditional 401k, but lets you donate up to $16,500 a year (and more depending on your age and marital status) compared to the traditional $5,000 you can normally contribute to a Roth. [Read More...]

How to Withdraw with your Roth IRA

Withdrawing From Your Roth IRA is Easy

Withdrawing from your Roth IRA is much easier than trying to pull funds from your traditional IRA, you just need to observe a few rules to keep yourself safe. You will need to meet the “distribution of earnings” rules, or the IRS will tax you. Here I’ll show you how you can withdraw early from your individual retirement account and avoid the penalties that can make investing in retirement not worth it. [Read More...]

What is a Roth IRA?

Times are hard, and you need to know how to invest your money for the future! What is a Roth IRA, and how can it make your money work for you? Is this the right investment for your retirement? Can anyone use them for retirement, or is it restricted? There are a lot of questions around investing wisely, and here we’ll be going over how you can use them to plan for your retirement and beyond. If you want to know more, keep reading! [Read More...]

Setting up a Roth IRA

In today’s tough economic world, it might be in your best interest to set up a Roth IRA with some of your money so you have protection after retirement. The major benefit of opening a Roth IRA is that it is protected by United States laws and is not taxed so long as the account meets certain requirements. If these requirements are not met by the account then the government can either tax the account or have it closed. If your account is ever closed it will need to be reopened with another number, hopefully using an accountant or financial planner who will steer you in the correct direction. [Read More...]


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