Through Buttonwood Art Space and our community involvement, we are fortunate to interact with thousands of people. And you guessed it, we hear many financial comments along the way. One of these is: “I make too much money to be able to contribute to a Roth IRA, so I’ve not done it.”
Not contributing to a Roth IRA is a mistake – especially for those with higher incomes
With higher income, you have an increased opportunity to save for the future! Take advantage of opportunities and a lifetime of financial comfort is much more likely. Unlike money in traditional retirement plans, Roth IRA assets are not subject to Required Minimum Distributions, nor are they taxable when they are withdrawn. These two benefits alone can make a dramatic difference on how long investment assets will last in retirement, and the size of your future tax bill!
In conjunction with funding a 401(k), or similar, for tax savings, direct additional dollars to a Roth. If you make too much income to contribute to a Roth, contribute to a Traditional IRA and report it to the IRS when you file your tax return as a non-deductible contribution on form 8606. It’s important to make sure you don’t run into a tax event with pro-rata calculations, but assuming all your other retirement plan assets are in a qualified employer plan, investors are able to convert 8606 reported assets to a Roth IRA without any tax consequences. If you can’t convert today, it’s likely you will be able to at some point in the future.
At Buttonwood, we develop client specific strategy by thinking about assets, account types, tax implications and retirement cash flow as interrelated to one another – not as standalone strategies.
For the same reason a business would hire a CFO, we serve as Family CFO for our clients. We coordinate comprehensive tax, insurance, estate, investment, cash flow, retirement, education and business strategies. We not only make specific recommendations, we also implement, monitor and adjust strategy as you and your family move through life. We do the work allowing you more time to appreciate your wealth.
If comprehensive strategies are something you are interested in, simply click here to schedule an informal conversation to learn how our Family CFO services can benefit you and your family.