April 15 is right around the corner, and if you haven’t made your IRA contribution for the 2020 tax year, it’s time to write that check. If your go-to account has always been a traditional IRA, give some thought this spring to a Roth IRA.
A Roth IRA account provides significant tax advantages, namely, tax-free growth potential, tax-free withdrawals, and no required minimum distributions. These benefits can be a big plus in retirement when it comes time to take out money and manage the resulting tax liability. Today, many retirees find themselves in a surprisingly high tax bracket because they’ve saved for years in tax-deferred retirement plans. Disciplined savers who’ve contributed to 401(k) or 403(b) plans for decades can easily lose 20%–30% or more of their retirement income to taxes.
It’s not mandatory to pay high taxes as you age, especially since tax-efficient retirement income strategies are available. At Johnson Brunetti, we often recommend clients reduce their reliance on tax-deferred accounts and increase their tax-free and taxable savings. Our suggested tactics include making annual contributions to a Roth IRA or converting an existing tax-deferred account such as an IRA or 401(k) to a Roth IRA.
Some people won’t consider a Roth IRA because the plan doesn’t provide an immediate tax deduction; however, that deduction may pale in comparison to a Roth’s future tax benefits. The only way to know for sure is by crunching the numbers.
As financial advisors, we’re experienced number crunchers. We also build tax-smart retirement income strategies. And we’re here to tailor retirement savings and income plans to your personal needs.
Let’s get acquainted. Contact us today to book a free 15-minute consultation or schedule an appointment.