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Importance of ROTH IRA - Special report prepared by Kingshook Ghosh, CFA

Roth IRA was created in 1997 and is an after-tax account.

There is also Roth 401K whose principle is similar with same limits as Regular 401k.

Your normal 401k or Traditional IRA are pre-tax or tax deferred accounts.
Meaning, when you withdraw the money after 59.5years of age, you have to pay income tax rates on the withdrawal amount. Example, if you have 100,000$ in your Regular 401k or Rollover IRA or Traditional IRA accounts and your tax bracket is 30%, and you withdraw 10,000$ then you have to pay 3000$ in taxes (assuming you already have other income equal to your standard deduction). Not so for a Roth IRA.

If you have 100,000$ in Roth IRA, after 59.5 years of age, you can withdraw any portion or entire amount tax free. Further, before 59.5 years you can withdraw the entire Roth IRA contribution for any reason at no tax or penalty. So in addition to your 401K, you should fund your Roth IRA annually, if you have the money. Taxwise, it is one of the best.

a. You can contribute directly to Roth IRA if you are below income limits (see table below). 
6000$ annually for those 50yrs and less, 7000$ > 50yrs
Deadline April 15th, 2020 for CY 2019.
You can also contribute for CY 2020 at the same time or by April 15th, 2021

b. If you are over income limits then use the Backdoor/Indirect method below
No income limits, even Bill Gates can contribute, if you use the Backdoor Roth IRA way (contribute to a Traditional IRA account first and then 'convert' the contribution to your Roth IRA account)

Let me know, if you need any help managing your 401k or Roth IRA accounts
If you connect your bank account to your Traditional IRA account, that is the easiest way to contribute:

Kingshook Ghosh, CFA
Canton, MI

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