Smart Money Move: Invest in a Roth IRA

At Barry Investment Services, Beverly specializes in investment guidance and retirement income strategies.

Beverly Barry is a registered representative and investment advisor with LPL Financial. LPL is credited with being the nation’s leading independent brokerage firm. At Barry Investment Services, Beverly specializes in investment guidance and retirement income strategies. She has served in the industry for 23 years.

“The experts are saying that by allowing Roth IRAs, the government has created the single most powerful estate building and wealth transfer vehicle available today,” says Beverly. “Additionally, by not imposing RMDs (required minimum distributions) on the account owner, the American taxpayer has been given one of the greatest income tax ‘loopholes’ in existence.”

“One of the smartest money moves a young person can make today is to invest in a Roth IRA,” adds Beverly. If they follow the rules, any money put into a Roth IRA retirement-savings account can grow absolutely tax-free. Plus, an IRA is more flexible than a standard 401(k) and other retirement plans because the money can be invested in almost anything you want – from stocks and bonds to real estate. And unlike traditional IRAs, there are no age limits when starting a Roth IRA. Age 8 or 85, you can start investing anytime, as long as income is being earned.

Beverly explains the basic differences between a traditional IRA and a Roth IRA: With a traditional IRA, you may get a tax deduction that essentially lets you deposit pre-tax dollars into the account. Any growth of principal is tax-deferred, but the principal is subject to market fluctuation and may actually lose value. You pay income tax on the entire amount whenever money is withdrawn. With the Roth IRA, you pay income tax upfront and then make your contribution with post-tax dollars. Any growth of principal is tax-free; but again, principal is subject to market fluctuation and may lose value. You pay no further taxes on qualified withdrawals with the Roth IRA.

Another unique benefit to the Roth IRA is the account holder’s access to withdrawals. Contributions may be withdrawn at any time without penalty tax or income tax. You also have income-tax-free and penalty-tax-free withdrawals of earnings after five years if you are age 59 and a half, or in the circumstance of death, disability, or for a first-time home purchase up to $10,000. One of the penalty-tax-free, but not income-tax-free, withdrawals before age 59 and a half can be for higher education expenses.

In a nutshell, Roth IRA advantages include tax-free qualifying distributions, an effectively bigger account value – especially if tax rates go up – and there are no RMDs required during your lifetime. There is no age limit on contributions with earned income, and a Roth IRA can diversify tax risk. They offer greater flexibility because you can access contributions at any time tax-free. They also provide benefits regarding Social Security taxation, in that tax-free bonds are included and qualifying Roth IRA distributions are excluded.

Like most things, there are also some disadvantages to a Roth IRA account. All contributions are non-deductible and the perceived tax benefit may never be realized. In other words, one might not live to retirement or much beyond, in which case, the tax structure of a Roth only serves to reduce an estate that may not have been subject to tax. If you convert to a Roth IRA, you could lose growth potential of the money paid in taxes.

Rules regulating traditional IRAs, Roth IRAs, and conversions are numerous when addressing the multiple circumstances of investors. This article does not attempt to address all the intricacies of either type of IRA, nor does it make recommendations on how you should invest your money. For a detailed summation and guidelines to help you in making decisions on how past and future investments could best serve you, it is highly recommended that you consult with a professional. Call Beverly Barry at (918) 747-2666 for a your consultation.

For more information, contact

Barry Investment Services

4815 S. Harvard, Ste. 205

(918) 747-2666

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Securities offered through LPL ­Financial,
Member FINRA/SIPC.