ROTH IRA's

[Safire]

I had a lady ask me about putting money into a ROTH, the people at the bank had suggested this to her.

I have never thought ROTH's to be the way to go for a younger person, say 50 or less. That is if they would qualify for a Traditional IRA deduction and they do not expect to be filthy rich when they retire.

I see it as trading a chance that you might pay taxes on retirement down the road, for definitly paying taxes on money they put into ROTH's now.

Am I missing something about ROTH's that would be of benefit to Average to Lower Income Joe American?

[Bird Legs]

Roth IRA

See page 13-6 in TheTaxBook for advantages and disadvantages.
If the client is in the lower tax bracket then an IRA deduction might not be a
big tax advantage.
Where I like the Roth IRA is for children in school where the income is small
with little or no income tax.

[Safire]

Thanks

I will check it out.

[Kim K]

safire,
You ask how a roth might benefit a young or low income client. Look up the Savers credit. If they meet the guidelines and income( and had a tax liability), they could receive more on their income tax refund, while saving for retirement, home, education ect.
Kim K

I had a lady ask me about putting money into a ROTH, the people at the bank had suggested this to her.

I have never thought ROTH's to be the way to go for a younger person, say 50 or less. That is if they would qualify for a Traditional IRA deduction and they do not expect to be filthy rich when they retire.

I see it as trading a chance that you might pay taxes on retirement down the road, for definitly paying taxes on money they put into ROTH's now.

Am I missing something about ROTH's that would be of benefit to Average to Lower Income Joe American?

[Unregistered]

Roth Ira

most people tend to increase their level of pay throughout life and therefore tend to be in a higher tax bracket later in life. also, with RMD's being what they are in the 1st 5 years after age 70 an IRA worth $1 million dollars could generate a substantial taxable income for a taxpayer. IF this money were held in a ROTH it would not create any tax liability. I almost always advise all of my ROTH eligible clients to invest in a ROTH for this main reason, but each situation is different.

[Lion]

Young

The younger, the better: the magic of compound interest. Young and low income: more likely to need to dip into it for house, car, college, etc., and need to pull from their contributions tax free instead of from a regular IRA with potential 10% penalty as well as regular income tax. Savers' Credit. Young living at home or college and working for little money, but with few expenses if room and board paid by parents, can invest disposable income in a Roth for all the fore-mentioned reasons. Income so low a regular IRA is little benefit, then do a Roth. Lots more reasons to take advantage of a Roth, especially for the young &/or low income.

[Gretel]

Rmd

You never have to worry about RMD with a Roth. You could pass on to heirs if desired.

[Unregistered]

RMD's

exactly my point. I was referencing RMD's related to a traditional IRA in my earlier post. by setting up the ROTH you avoid RMD's and the potential tax consequences.

[OldJack]

wise banker

I had a lady ask me about putting money into a ROTH, the people at the bank had suggested this to her.

A wise banker for the very reasons posted here by the others.