Advantages of Having a Roth IRA and Being Sustainable
Over 60 million taxpayers own individual retirement accounts (IRAs), which include traditional IRAs, Roth IRAs, Simplified Employee Pensions (SEP IRAs), and Savings Incentive Match Plans for Employees (SIMPLE IRAs). That may seem like a lot, but that leaves over 250 million others who do not save in a tax deferred investing, which may include you, the reader. Well, let’s change that. A ROTH IRA is an Individual Retirement Account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and earnings can grow tax-free, and you can withdraw them tax- and penalty-free after age 59½ and once the account has been open for five years. Other advantages of having a Roth IRA include:
- No contribution age restrictions. You can contribute at any age as long as you have a qualifying earned income.
- No Required Minimum Distributions (RMDs). There are no mandatory withdrawals, allowing your savings to continue to grow even during retirement.
- No income taxes for inherited Roth IRAs. If you pass your Roth IRA onto your heirs, their withdrawals will also be income tax-free.
A Roth IRA can be a good savings option for those who expect to be in a higher tax bracket in the future, making tax-free withdrawals even more advantageous. However, there are income limitations to open a Roth IRA, so not everyone will be eligible for this type of retirement account.
Your eligibility to open a Roth IRA and how much you can contribute is determined by your Modified Adjusted Gross Income (MAGI). If you are a single or joint filer, your maximum contribution starts to reduce at $124,000 and $196,000 for tax year 2020, and $125,000 and $198,000 for tax year 2021, respectively.
Current contribution limits, even if you’re already covered by an employer-sponsored plan:
- $6,000 in you’re under age 50
- $7,000 if you’re age 50 or older
And last but not least, through an investment platform like Sustainfolio, you can have a ROTH IRA and also be invested with only sustainable funds that integrate ESG or environmental, social and governance screens into the funds that you will be invested in. That means you don’t have to own those poor environmental stewards in your investment portfolio. You can rely on the ESG funds to do the screening out for you AND have a portfolio there for you when you retire.
Sustainfolio has just a $5,000 minimum making it easy to get that ROTH or Traditional IRA opened up.