You Can’t Afford to Ignore This Wealth-Making Machine
To catch up, you need to make the most of the opportunities you have. One way to save for retirement is to use
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Can I open a Roth IRA?
To open a Roth IRA, you need to meet two requirements. You need to have earned income from a job or from self-employment. You also need to meet the adjusted gross income limits that prevent high-income earners from contributing to Roths. You'll find those limits for 2018 Roth IRAs below:
For this filing status
Contributions are reduced if income is above this amount
Contributions are not available if income exceeds this amount
Single, head of household, or married filing separately IF you didn't live with your spouse during the year
Married filing jointly or qualifying widow or widower
Married filing separately IF you lived with your spouse at any point during the year
Data source:
If your income is below the levels in the first column above, then you'll be allowed to contribute
You can open a 2018 Roth IRA right now. But you also have until
What other ways can I get money into a Roth?
If you don't meet the income limits for contributions, there's another way to move money into a Roth IRA. That involves taking money that's in traditional retirement accounts, including regular IRAs and 401(k) plans, and doing what's called a Roth conversion.
Roth conversions have pros and cons. On the downside, you have to pay taxes when you convert money in a regular IRA or 401(k) to a Roth. However, from then on, the money is treated the same way as a Roth contribution, giving you tax-free treatment for portfolio income and gains on your investments. The reason converting to a Roth is particularly advantageous right now is that with income tax rates having fallen as a result of tax reform, the tax hit you'll take from converting is less now than it has been in years.
Why it makes sense to have a Roth
Some people wonder why they really need a Roth IRA, especially if they already have another type of retirement account. Yet once you actually retire, there are several financial planning advantages of having a Roth at your disposal.
The biggest reason to consider a Roth is that it'll give you a tax-free source of money for retirement spending. Those who rely solely on traditional IRAs and 401(k)s often find that their tax bills are a lot higher than the expected, because they end up having to pay taxes on their distributions. Having a Roth at your disposal can let you control your tax bill, avoiding moving into too high of a tax bracket and also potentially working around some traps that can plague retirees whose taxable incomes are too large.
The worst thing a successful investor has to do is to give up hard-earned wealth to the
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If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "
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