The Importance of Funding a Roth IRA for Long Term Security
Over the years, a lot of my clients, whether they’re in residency or out of training have asked if I wanted to put money away on a long-term basis, where do you feel like I would be best served with those monies?
My thought process is if we think that tax brackets could potentially be higher in the future, would it be sensible to increase the amount of money in our tax free bucket. If the answer is both of those questions is yes, the Roth IRA is, simply put, the best strategy for you in that capacity.
So you might ask yourself, why is it so important to fund a Roth IRA when in training when I have limited resources available to me or when I’m in practice where I’ve been told that my income precludes me from being able to make a contribution.
Well, let’s talk first about training. The primary reasons while in training is number one, you might not be able to utilize a Roth once you complete training because you may make too much money. Once your income level exceeds a particular point by definition the IRS says you can no longer make direct contributions to a Roth IRA.
Secondly, the benefits of compound interest in a tax free account are significant when considering long-term growth and future tax brackets. A Roth IRA, the contributions after tax so you receive no tax benefit today the values grow on a tax deferred basis and you have access to them on a tax free basis.
This is a sizeable consideration when considering your net worth. For some of my clients that are in practice it’s critical to be aware that you could still fund a Roth IRA. We have another video post here describing exactly this subject.
Watch the video of this article:
If you would like to learn more about this subject or receive a free quote then please contact us and we’ll be happy to help.