The Power of a Roth IRA

The Power of a Roth IRA

Plan Your Future Today

Whether you are a member of Rembrandt SocietySM at the Gallery, Museum or Private levels, the team at VLC encourages parents and seniors to invest in a Roth IRA.

Gifting your children and grandchildren through a Roth IRA represents a powerful financial tool that comes with many benefits including the ability to save post tax dollars. Following retirement age, funds can be withdrawn tax-free.

The benefits of maintaining a Roth IRA lie in the eye of the beholder and depend upon your tax bracket:

  • There is no upfront tax deduction for Roth IRA contributions unlike what is required for a traditional IRA.
  • Distributions are tax-free when you follow the rules.
  • Every dollar contributed to a Roth IRA is yours. You can tap into your contributions (but not your earnings) at anytime, tax and penalty free.

Determining your eligibility

Roth IRA contributions are only allowed as determined by income eligibility limits or modified adjusted gross income (MAGI):

Category2018
Contribution limit$5,500
Contribution limit age 50 and over$6,500
Traditional IRA contribution limit$5,500
Traditional IRA contribution limit age 50 and over$6,500
Roth IRA income limits for single filersStarting at $120,000 but less than  $135,000
Roth IRA income limits for those married filing jointly and qualified widow(er)sStarting at $189,000 but less than $199,000

Compare these two astounding scenarios

Scenerio AnalysisGrowth Rate8%
Scenerio OneScenerio Two
AgeInvestmentInterest TotalAgeInvestmentInterest Total
225500$0.00$5,500.0022$0.00$0.00$0.00
235500$440.00$11,440.0023$0.00$0.00$0.00
245500$915.20$17,855.2024$0.00$0.00$0.00
255500$1,428.42$24,783.6225$0.00$0.00$0.00
265500$1,982.69$32,266.3126$0.00$0.00$0.00
275500$2,581.30$40,347.6127$0.00$0.00$0.00
285500$3,227.81$49,075.4228$0.00$0.00$0.00
295500$3,926.03$58,501.4529$0.00$0.00$0.00
305500$4,680.12$68,681.5730$0.00$0.00$0.00
310$5,494.53$74,176.0931$5,500.00$0.00$5,500.00
320$5,934.09$80,110.1832$5,500.00$440.00$11,440.00
330$6,408.81$86,519.0033$5,500.00$915.20$17,855.20
340$6,921.52$93,440.5234$5,500.00$1,428.42$24,783.62
350$7,475.24$100,915.7635$5,500.00$1,982.69$32,266.31
360$8,073.26$108,989.0236$5,500.00$2,581.30$40,347.61
370$8,719.12$117,708.1437$5,500.00$3,227.81$49,075.42
380$9,416.65$127,124.7938$5,500.00$3,926.03$58,501.45
390$10,169.98$137,294.7739$5,500.00$4,680.12$68,681.57
400$10,983.58$148,278.3540$5,500.00$5,494.53$79,676.09
410$11,862.27$160,140.6241$5,500.00$6,374.09$91,550.18
420$12,811.25$172,951.8742$5,500.00$7,324.01$104,374.20
430$13,836.15$186,788.0243$5,500.00$8,349.94$118,224.13
440$14,943.04$201,731.0644$5,500.00$9,457.93$133,182.06
450$16,138.49$217,869.5545$5,500.00$10,654.56$149,336.63
460$17,429.56$235,299.1146$5,500.00$11,946.93$166,783.56
470$18,823.93$254,123.0447$5,500.00$13,342.68$185,626.24
480$20,329.84$274,452.8948$5,500.00$14,850.10$205,976.34
490$21,956.23$296,409.1249$5,500.00$16,478.11$227,954.45
500$23,712.73$320,121.8550$5,500.00$18,236.36$251,690.80
510$25,609.75$345,731.5951$5,500.00$20,135.26$277,326.07
520$27,658.53$373,390.1252$5,500.00$22,186.09$305,012.15
530$29,871.21$403,261.3353$5,500.00$24,400.97$334,913.13
540$32,260.91$435,522.2454$5,500.00$26,793.05$367,206.18
550$34,841.78$470,364.0255$5,500.00$29,376.49$402,082.67
560$37,629.12$507,993.1456$5,500.00$32,166.61$439,749.28
570$40,639.45$548,632.5957$5,500.00$35,179.94$480,429.23
580$43,890.61$592,523.1958$5,500.00$38,434.34$524,363.56
590$47,401.86$639,925.0559$5,500.00$41,949.09$571,812.65
600$51,194.00$691,119.0560$5,500.00$45,745.01$623,057.66
610$55,289.52$746,408.5861$5,500.00$49,844.61$678,402.27
620$59,712.69$806,121.2762$5,500.00$54,272.18$738,174.46
630$64,489.70$870,610.9763$5,500.00$59,053.96$802,728.41
640$69,648.88$940,259.8464$5,500.00$64,218.27$872,446.69
650$75,220.79$1,015,480.6365$5,500.00$69,795.73$947,742.42

Appeal of a Roth IRA

Parents and grandparents

A Roth IRA is a useful investment tool for those who wish to plan ahead for their children and grandchildren during the years that the children earn income but not enough to save for a Roth.

Older, wealthier tax payers

If you fall into this category, you can minimize the tax bite heading into retirement by using a Roth IRA to contribute to your heirs tax-free. Since there are no required minimum distributions (RMDs), wealthy retirees can leave their Roth funds untouched if they choose to do so. A Roth IRA makes the most sense for those who expect their tax rate to be higher during retirement than their current bracket.

Working age children

Children of legal working age who earn enough qualifying income may contribute to a Roth IRA.

Consider the benefits of a backdoor Roth IRA

When you convert a traditional IRA to a Roth IRA there are no income limits for such conversions. But you will pay income tax on the contributions. The taxable amount that is converted is then added to your income taxes. Your normal income tax rate is applied to your total income.

Find out if a Roth IRA is the right investment vehicle for you

Van Leeuwen and Company is approved by the IRS to offer Roth IRAs to its clients. For  step-by-step instruction in determining your Roth IRA contribution eligibility, contact Van Leeuwen and Company for a private consultation. Ask about your eligibility to the exclusive Rembrandt SocietySM wherein a seasoned VLC advisor will meet with you to plan ahead for your masterpiece, including setting up your Roth IRA.

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