Florida Estate Planning and Probate Law Blog focused on recent case law and planning ideas.

ROTH IRA ADDITIONAL PLANNING OPTIONS


Most individuals view a Roth IRA as a great way to save more for the future using after tax dollars. While the funds deposited into a Roth IRA are subject to income tax, they grow tax-free and are not subject to tax, even the growth, when withdrawn (assuming certain requirements are met).  However, a Roth IRA has other advantages that most individuals do not know about or utilize:

Saving for College:

A Roth IRA can be utilized to pay college expenses without the contributed funds being subject to any income tax or early withdrawal penalty. Unfortunately, while account earnings on contributions can be withdrawn penalty free, they still may be subject income taxation. 

In contrast, a 529Saving Plan will allow you to save a larger amount for college expenses but are not as flexible when it comes to investing and utilizing the funds. While contributed funds will grow tax-free, the account earnings will be subject to income tax upon withdrawal and subject to a 10% penalty if not utilized for college expenses.

Saving for a Home

A Roth IRA can be utilized to save for a down payment on the purchase of a home. To qualify, the purchasers must be first-time home buyer (someone who hasn't owned an interest in a home within the past two years) and had their Roth IRA set up for five years. Subject to those restrictions, they can withdraw up to $10,000 to buy, build, or rebuild a home without paying the 10% early withdrawal penalty or worrying whether your withdrawing contributions or earnings. The exemption may also be utilized to assist children or grandchildren purchase their first home.

Savings Option:

While the opportunity to contribute to a traditional IRA stops the year you turn 70.5 years old, contributions can be made to a Roth IRA as long as you live. If you're over 50 years old, you can contribute up to $6,500 per year as long as your income is below annual limits.


Sarasota and Manatee County residents can contact me directly to learn more.