Why Roth IRA Works for Older Investors
While Individual Retirement Accounts are often thought of as a retirement savings vehicle for younger people, older investors can benefit from having an IRA. The Roth IRA offers plenty of incentives for older investors.
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Features
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Unlike a traditional IRA, there is no age limit on making contributions to a Roth IRA. As long as you have earned income, you can make contributions to a Roth IRA regardless of your age.
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Significance
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There are no mandatory withdrawals at age 70.5 with a Roth IRA. That makes them attractive for older investors who may not need to withdraw money until they are older.
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Benefits
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Older investors can take advantage of the IRS catch-up rule, which allows people over the age of 50 to contribute an extra $1,000 per year to their Roth IRA.
Inheritance
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Leaving as much money as possible for beneficiaries is one of the biggest advantages to a Roth IRA. Money left to beneficiaries after the Roth IRAs owner's death will not be subject to federal taxes provided the account has been open for five or more years.
Considerations
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There are several exemptions to early Roth withdrawal penalties that could be advantageous for older investors. Exemptions include death of the account holder, in which case the surviving spouse could get their hands on the money; higher education costs and first-time home buyer allowance, which can be used for kids or grandchildren; disability; and excessive medical bills that are not covered by insurance.
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