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Yes, You Can Roth
www.BlackhawkLivingCA.com @BlackhawkLivingCA #BlackhawkLivingCA
By Joe Morgan, CFP®, CFA, Principal: JWM Wealth Management, LLC
A Roth account can be a magical thing. It is one of the only ways to actually pay no income taxes.
How does it work? Well, it’s a retirement account where you put in funds without getting a tax deduction in exchange for locking them up. At the point of contribution, it’s basically the opposite of a 401k or Traditional IRA.
When you add to your 401k, it is a “pre-tax” contribution, meaning the entire amount you contribute goes into the account and none of it is reported as income today.
However, when you take it out in retirement, all of it is reported as ordinary income for tax purposes – even the capital gains that come from investing.
In a Roth, you actually pay taxes today on your contribution, but do not ever pay any taxes on withdrawals – even on the withdrawals of earnings. None. Zero.
While there are income limitations for Roth IRA contributions ($203,000 for married filing jointly), there are no such limits if your 401k has a Roth option.
Check with your employer to see if a Roth option exists and consider building those tax-free balances today!
This is a bird’s-eye view of Roth accounts, but there are many more nuances. Don’t take anything here as advice, however if you’d like to learn more, join me over on my blog at https://jwmwealth.com/ blogs/thoughts-yes-you-can-roth and let’s start calibrating your path to clarity!
JWM Wealth Management, LLC is a Registered Investment Advisor with the State of California and Joe Morgan is a fiduciary to his clients at all times. If you’d like to ensure your finances are on the right track, schedule a call with Joe at www.calendly.com/jwmwealth. You can also learn more at jwmwealth.com.
