Ugh – It’s going to be raining all week! I was hoping to sneak in some fishing (don’t tell my wife). Stay cool, and stay dry.
In the last issue, we discussed the tax-deferred growth, who might benefit most, and the Required Minimum Distributions (RMD) of a Traditional IRA. This week, we will start our multi-part series on the differences between the Roth IRA and how to understand it.
Roth IRA: A Closer Look
After-Tax Contributions, Tax-Free Growth
With a Roth IRA, you contribute money that has already been taxed. In return, your investments grow tax-free, and, provided certain conditions are met, all qualified withdrawals in retirement are completely free of federal income tax.
Qualified Withdrawals
To take a tax-free and penalty-free withdrawal of earnings, two conditions generally must be satisfied:
- The account must have been open for at least five years (the “five-year rule”).
- You must be at least age 59½, or the distribution must qualify for an exception (such as a first-time home purchase up to $10,000, disability, or death).
- There are also many new exceptions following the passage of the SECURE Act and the SECURE Act 2.0.
Importantly, your contributions (not earnings) can always be withdrawn at any time without taxes or penalties, since you already paid taxes on that money.
No Required Minimum Distributions
Unlike a Traditional IRA, a Roth IRA does not require you to take distributions during your lifetime. This makes it a flexible tool for those who may not need the funds immediately in retirement and for those interested in passing assets to heirs.
Next issue, we will begin looking more deeply at the Roth IRA and discuss the income limits and who might benefit most.
(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.)
Guess what?!? I have two chances to meet you next 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:
“Always desire to learn something useful.” – Sophocles
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.