Why a Roth IRA Is a No-Brainer for Retirement Savers

Roth accounts offer big advantages over traditional IRAs and 401(k)s.

Looking for a surefire wealth builder? Open a Roth IRA. You fund this retirement account with after-tax dollars, so the pain is up front. The payoff? All withdrawals are tax-free if you’re at least 59½ and have held the account for at least five years. You can always withdraw your original contributions tax- and penalty-free.

With traditional IRAs and 401(k)s, you have to take required minimum distributions every year. Not so with a Roth -- you can withdraw money strategically. Or, you can just let it grow and leave it to your heirs. And because withdrawals from a Roth aren’t reported to the IRS as income, they won’t increase the taxes on your Social Security benefits. Roth withdrawals also won’t trigger the high-income surcharge on Medicare Part B or Part D.

You can contribute up to $5,500 to a Roth IRA in 2017 – or $6,500 if you’re 50 or older – as long as you meet income limits. Allowed contribution starts to shrink if modified adjusted gross income is more than $186,000 for married couples filing jointly, or $118,000 for singles. You can’t contribute at all once modified adjusted gross income reaches $196,000 for joint filers, or $133,000 for singles.

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Earn too much to qualify for a Roth IRA? Your employer may offer a Roth 401(k), which has no income limits and carries the same higher contribution caps as a regular 401(k). For 2017, the 401(k) contribution limit is $18,000, or $24,000 if you’re 50 or older.

David Muhlbaum
Former Senior Online Editor

In his former role as Senior Online Editor, David edited and wrote a wide range of content for Kiplinger.com. With more than 20 years of experience with Kiplinger, David worked on numerous Kiplinger publications, including The Kiplinger Letter and Kiplinger’s Personal Finance magazine. He co-hosted  Your Money's Worth, Kiplinger's podcast and helped develop the Economic Forecasts feature.