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Roth IRA Drawbacks Explained


The Roth IRA is a fantastic tool for retirement, however, there are some disadvantages you need to be aware of. Have a question you want to be answered on the show? Call or text 574-222-2000 or leave a comment! Want to speak with a Certified Financial Planner™? Visit or call 574-247-5898. Find more information about the Wise Money Show™ at LINKS: Be sure to stay up to date by following us! Facebook - ​ Instagram - Twitter - ​ Want more Wise Money™? Read our blog! ​ Listen on Podcast: ​ Subscribe on YouTube: Mike Bernard, CFP® offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results....(read more)


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The Roth IRA is a retirement investment account that allows for tax-free withdrawals during retirement. While it is a popular choice for many investors, it also comes with some disadvantages that are worth considering before opening this type of account. 1. No tax deduction on contributions: Unlike traditional IRA accounts, contributions made to a Roth IRA are not tax-deductible. This means that investors cannot lower their taxable income by contributing to a Roth IRA. 2. Lower contribution limits: The annual contribution limit for a Roth IRA is lower compared to that of a traditional IRA. For 2021, individuals can contribute up to $6,000 to a Roth IRA, whereas the limit for a traditional IRA is $6,000 plus an additional $1,000 catch-up contribution for individuals aged 50 and over. 3. Eligibility restrictions: Not everyone can contribute to a Roth IRA. To be eligible, an investor’s income must fall under a certain threshold. For 2021, single filers with a Modified Adjusted Gross Income (MAGI) above $140,000 and married couples filing jointly with a MAGI above $208,000 are not eligible to contribute to a Roth IRA. 4. No early withdrawal penalty exemption: While Roth IRA withdrawals are tax-free during retirement, there is no exemption from the early withdrawal penalty for those who need to access their funds before the age of 59.5. This means that if you withdraw funds before the eligible age, you will incur a 10% penalty fee in addition to ordinary income taxes. 5. No required minimum distributions: While this may seem like an advantage, it can also be a disadvantage for some investors. Traditional IRAs require minimum distributions to be taken at age 72, ensuring that investors are withdrawing enough funds to cover their living expenses during retirement. With a Roth IRA, there are no minimum distributions required, which could result in some individuals not withdrawing enough funds during retirement. In conclusion, the Roth IRA is a popular choice for many investors due to its tax-free withdrawals during retirement. However, it also comes with some disadvantages such as lower contribution limits, eligibility restrictions, and no tax deduction on contributions. Investors should weigh these disadvantages carefully before choosing to open a Roth IRA account. https://inflationprotection.org/roth-ira-drawbacks-explained/?feed_id=98540&_unique_id=6465206595ed2 #Inflation #Retirement #GoldIRA #Wealth #Investing #financial #korhorn #RothIRA #wisemoneyshow #VanguardIRA #financial #korhorn #RothIRA #wisemoneyshow

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