While the benefits are fairly straightforward, there are a few complexities to consider. With some advanced planning, you can further maximize the tax advantages of the Roth IRA for future generations. There are also some mistakes that could wipe out any potential tax benefits.
Are you one of the millions of Americans who have decided to use a Roth IRA to accumulate retirement assets? That may be a wise idea. The Roth IRA has a number of appealing features, including tax-deferred growth and tax-free distributions after age 59½.
There was a time when retirees could count on guaranteed lifetime income from Social Security and an employer pension to fund their golden years. Those days are long gone, though. While today’s retirees still enjoy Social Security income, very few have access to a pension. In 1998 nearly 60 percent of Fortune 500 companies offered a pension. As of 2015 fewer than 20 percent offer one.1
Still, there are some employers that offer their employees pensions, also known as defined-benefit plans. The 401(k) is the standard when it comes to retirement benefits, but the defined-benefit plan hasn’t gone totally extinct yet.