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IRA Calculator
A Roth Individual Retirement Account (IRA) is a retirement savings vehicle that allows your investments to grow tax-free, with qualified withdrawals in retirement also being tax-free. Using a Roth IRA calculator can help you understand your potential savings.
Benefits
- No Required Minimum Distributions (RMDs): Unlike Traditional IRAs, Roth IRAs do not require you to take distributions at a certain age, allowing your savings to continue growing tax-free.
- Tax Diversification: Having tax-free income in retirement can provide flexibility and potentially reduce your overall tax burden.
You have questions? We have answers.
After you crunch your numbers on the Roth IRA calculator, the next step is to give us a call! We can help answer questions you may have or direct you to the next step to starting your retirement savings!
Key Features of a Roth IRA:
- Tax-Free Growth and Withdrawals: Contributions are made with after-tax dollars, so both your investment earnings and qualified withdrawals during retirement are tax-free.
- Contribution Limits for 2024: You can contribute up to $7,000 annually, or $8,000 if you’re age 50 or older. citeturn0search3
- Income Eligibility: Your ability to contribute to a Roth IRA depends on your Modified Adjusted Gross Income (MAGI).
- Single Filers: Full contributions are allowed if MAGI is less than $146,000; contributions phase out between $146,000 and $161,000.
- Married Filing Jointly: Full contributions are permitted if MAGI is less than $230,000; contributions phase out between $230,000 and $240,000.
- Withdrawal Flexibility: You can withdraw your contributions at any time without penalties or taxes. Earnings can be withdrawn tax-free if the account has been open for at least five years and you’re over age 59½.
Considerations:
- Contribution Limits: Ensure you stay within the annual contribution limits to avoid penalties.
- Income Limits: High earners may have reduced contribution limits or may not be eligible to contribute directly to a Roth IRA.
Getting Started with a Roth IRA at UCCU:
- Assess Your Eligibility: Review your income and tax filing status to determine your contribution limits.
- Open an Account: Visit UCCU’s website or a local branch to open a Roth IRA.
- Set Up Contributions: Decide on regular contributions that fit within your budget and adhere to annual limits.
- Choose Investments: Select investment options that align with your retirement goals and risk tolerance.
- Monitor and Adjust: Regularly review your account and make adjustments as needed to stay on track for retirement.
What is a Roth IRA?
A Roth IRA (Individual Retirement Account) is a retirement savings account that allows your money to grow tax-free. Contributions are made with after-tax dollars, and qualified withdrawals in retirement are 100% tax-free.
Who is eligible to contribute to a Roth IRA?
Eligibility to contribute to a Roth IRA is based on your Modified Adjusted Gross Income (MAGI):
- Single Filers: Full contributions if your MAGI is below $146,000 for 2024.
- Married Filing Jointly: Full contributions if your MAGI is below $230,000 for 2024.
Contributions phase out at higher income levels.
What are the tax benefits of a Roth IRA?
The primary benefits include:
- Tax-free growth on your investments.
- Tax-free withdrawals in retirement (as long as you meet eligibility requirements).
- No required minimum distributions (RMDs) during your lifetime.
Can I withdraw money from my Roth IRA early?
Yes, you can withdraw your contributions at any time without penalties or taxes. However, withdrawing earnings early (before age 59½ and before the account is 5 years old) may result in taxes and penalties.
What is the 5-year rule for Roth IRAs?
The 5-year rule states that you must hold the account for at least five years before withdrawing earnings tax-free. This rule applies even if you are over 59½.
Can I convert a Traditional IRA to a Roth IRA?
Yes, this is called a Roth IRA conversion. You’ll need to pay taxes on the amount converted, but your money can then grow tax-free in the Roth IRA.
How do Roth IRAs differ from Traditional IRAs?
- Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.
- Traditional IRA: Contributions may be tax-deductible, but withdrawals in retirement are taxed as income.
Check out our Roth vs Traditional IRA Calculator