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Education | Apr 11, 2017

For That Extra Cash, Consider a Roth or Other IRA

Steven Kohler


I want to follow up on one of my recent blogs on options for those with extra money in savings. Let’s revisit the topic of considering Roth or other IRA contributions if allowable.

As mentioned previously, contributions into a Roth IRA or IRA are limited based on AGI (adjusted gross income).

Roth IRA contributions for 2017 are phased out as follows:

  • Single $118,000 – $133,000
  • Married, filing jointly $186,000 – $196,000
  • Married, filing separately $0-$10,000

Traditional IRA contributions, for those participating in a qualified plan for 2017, are phased out as follows:

  • Single $62,000 – $72,000
  • Married, filing jointly $99,000 – $119,000
  • Spousal IRA deduction $186,000 – $196,000
  • Married, filing separately $0 – $10,000

A deduction is allowed in full if you and your spouse are not covered by a qualified retirement plan at work.

The ability to save into a Roth IRA or IRA will allow you to put away an additional $5,500 ($6,500 for those over 50) towards retirement.

Besides the income limitation and requirement, there is also an age limitation, however, for IRAs only. Once an individual turns 70.5, the ability to contribute to an IRA is eliminated. On the other hand, Roth IRAs do not have the age restriction. An individual can contribute to a Roth IRA at any age if they have taxable wage income and are not limited by the income phase outs previously mentioned. This is something to keep in mind if you are over 70.5 and are looking for a retirement savings option outside of an employer plan. Roth IRAs do not have the annual required minimum distribution requirements like traditional IRAs do and distributions from Roth IRAs are tax and penalty free for those over 59.5 and have had the account for at least 5 years.

Another differentiator and item to keep in mind is that any withdrawals from a Roth IRA are return of principal first. This is especially important for those under 59.5. With a Roth IRA, you can get your contributions back tax and penalty free. Any distributions that are above the contribution amount may be subject to tax and/or penalty depending on age and how long the account has been funded. IRA distributions before 59.5 are subject to tax and the early withdrawal penalty if not used for specific circumstances (ex. medical, education, etc.).

For those looking for additional savings options, saving into a Roth IRA or IRA can have many benefits. Between deductibility and withdrawal options, it is important to know the difference between the two and how it may impact you. If the previously mentioned income phase outs apply to you, then you will want to tune in next week when we discuss non-deductible IRAs and how to use it as a savings vehicle.

This material has been provided for general, informational purposes only, represents only a summary of the topics discussed, and is not suitable for everyone. The information contained herein should not be construed as personalized investment advice or recommendations. Rather, they simply reflect the opinions and views of the author. D. B. Root & Company, LLC. does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. There can be no assurance that any particular strategy or investment will prove profitable. This document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such sources, and take no responsibility therefore. This document contains certain forward-looking statements signaled by words such as "anticipate," "expect", or "believe" that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. As such, there is no guarantee that the expectations, beliefs, views and opinions expressed in this document will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. All investment strategies have the potential for profit or loss. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. The impact of the outbreak of COVID-19 on the economy is highly uncertain. Valuations and economic data may change more rapidly and significantly than under standard market conditions. COVID-19 has and will continue based on economic forecasts to have a material impact on the US and global economy for an unknown period.

Steven Kohler


Chief Planning Officer

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