What Are These 2 Tools?
The Roth IRA and Index IUL. Most consumers are familiar with the Roth IRA and in -fact you may have one already. The Index IUL has become more and more of a tool that helps most any consumer save for their future, provide a nice legacy for your family, and have a nice tax-free retirement bucket. In April, I will discuss the importance and impact of having an Index IUL in your portfolio.
Basics For a Strong, Solid Consumer Roth IRA
A Roth IRA is a special type of tax-advantaged individual retirement account to which you can contribute after-tax dollars. The primary benefit of a Roth IRA is that your contributions and the earnings on those contributions can grow tax-free and be withdrawn tax-free after the age of 59½ assuming the account has been open for at least five years. In other words, you pay taxes on money going into your Roth IRA, and then all future withdrawals are tax-free.
The key here is using “after-tax dollars” so that after age 59 ½ you have a nice stream of money coming to you that you don’t pay taxes on in the future.
Since Roth IRAs are funded with after-tax dollars, this means that the contributions are not tax-deductible, but once you start withdrawing funds, the money is tax-free. So, compared to a traditional IRA the contributions to a Roth do not allow you to take a tax-deduction with the funds you use. The advantage of that is after age 59 ½ you will have, a nice Tax-Free retirement bucket. This is becoming increasingly more important as consumers balance out how and what they will be taxed on in the future.
Funding a Roth IRA
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All of these, once moved into a Roth IRA then makes those funds Tax-Free upon future withdrawals after age 59 ½.
The account holder can maintain the Roth IRA indefinitely; there are no required minimum distributions (RMDs) during their lifetime, as there are with 401(k)s and traditional IRAs.