Is it still raining? My neighbor had a chance to drop some lines in the water at the perfect time when the barometric pressure was right and packed a cooler!
In the last issue, we took a closer look at the tax-deferred and tax-free growth, qualified withdrawals, and the absence of Required Minimum Distributions (RMDs) in the Roth IRA. This week, we continue talking about the Roth IRA and discuss income limits, who might benefit most, and a side-by-side scenario.
Income Limits
Not everyone can contribute directly to a Roth IRA. For 2026, the ability to contribute phases out for single filers with MAGI between $153,000 and $168,000, and for married filing jointly between $242,000 and $252,000. Those above the upper threshold cannot make direct Roth IRA contributions (though other strategies may exist – consult a financial advisor for guidance).
Who Might Benefit Most
A Roth IRA may be worth exploring for those who:
- Expect to be in a higher tax bracket in retirement
- Are earlier in their career and currently in a lower tax bracket
- Want flexibility – no RMDs and the ability to access contributions at any time
- Are interested in tax-free income in retirement
- Want to leave tax-free assets to beneficiaries
Side-by-Side Scenario (Illustrative Only)
The following is a hypothetical example for educational purposes only. It does not represent actual investment results or predict future performance. Actual outcomes will vary based on individual circumstances, investment choices, and tax law changes.
Scenario: Two individuals each contribute $6,500 per year for 25 years, with an assumed annual growth rate of 7%.
- Traditional IRA investor receives an upfront tax deduction each year. At retirement, the entire account balance — approximately $427,000 in this hypothetical — is subject to ordinary income tax upon withdrawal.
- Roth IRA investor receives no upfront deduction but, in this scenario, could withdraw the entire balance tax-free in retirement.
The “winner” depends heavily on your current vs. future tax rate – a determination that requires personalized analysis.
Can You Have Both?
Yes. You may contribute to both a Traditional IRA and a Roth IRA in the same year, provided you meet each account’s eligibility requirements. However, the combined contributions across both accounts cannot exceed the annual limit ($7,500, or $8,600 if age 50+ for 2026).
Next issue, we will discuss rollovers and conversions and do a summary of this multi-part series on the Traditional IRA vs Roth IRA.
(This article is intended for general educational purposes only and reflects tax rules for the 2026 tax year. Tax laws are subject to change. This content does not constitute personalized investment, tax, or legal advice. Individual results will vary. Please consult a qualified financial advisor, tax professional, or attorney before making retirement planning decisions.)
Don’t forget the events this week with Live Like Locals! Meet me at Stoners Pizza Joint in Pooler on Wednesday, August 12th from 5:30 – 7:30 pm for $1.00 pizza slices at Throwback Pizza Night, and Thursday, August 13th at Abrazo at Rice Hope at the next Live Like Locals Social with the Mayor of Port Wentworth, Tracy Saunders, and the VP of Zawyer Sports, John Thompson.
Thought for the Week:
“If opportunity doesn’t knock, build a door.” – Milton Berle
Frederick Hogsett, Jr., is a licensed financial coach with almost 30 years of experience helping individuals, families, small businesses, and nonprofit organizations. He recently opened an office in Savannah, Georgia, and can be reached at (803) 463-2773 or by website at www.livemore.net/fhogsettjrclient.