Retirement Investing Through Roth IRA Plans–Can Individual Retirement Accounts Benefit Investors With Alternate Retirement Plans?

There are numerous investors who have turned to Roth IRA plans as a way to begin investing for their retirement in the hopes of either supplementing their current retirement accounts, but there are many individuals who question whether an Individual Retirement Account is beneficial when an alternate retirement plan is already in place. Obviously, many advisers argue that diversifying one’s retirement options can be beneficial, but there have been numerous men and women who have attempted to convert retirement plans like a 401(k) to a Roth IRA thanks to recent conversion opportunities which have been made available.

While there are some men and women who have been able to benefit from conversions to a Roth IRA, there are obviously some investors who are either in a position where they stand to lose more on taxes from a conversion since they are late into their retirement life or some individuals have been able to simply began a Roth IRA investment account and are now in a position where they can invest into various retirement options.

Obviously, there are both pros and cons to any retirement account, but one of the main benefits of a Roth IRA is the fact that investors will be able to withdraw earnings tax-free. While there are other retirement plans, like a traditional IRA, that allows an investor to write off contributions, taxes must be met once they begin withdrawing funds from their traditional IRA. While numerous investors are usually in a lower tax bracket when this occurs, the taxes that must be met may not be overly burdensome, but again, many see a Roth IRA as a much better alternative since they can keep all of their earnings.

Yet, one of the arguments that has been made for diversifying retirement accounts is the fact that investors may be able to cover taxes on one retirement account with earnings from another. As an example, some investors have a 401(k) and Roth IRA plan as a way to cover any losses which may be incurred once they begin withdrawing from from their 401(k) retirement plan.

However, there are limits to the amount that an investor can contribute to their Roth IRA as a $5,000 limit is applied for these types of accounts, with workers over 50 being able to contribute up to $6,000 per year. Obviously, options like a 401(k) offer an investor more opportunities to contribute a higher dollar amount to their retirement, but since there are no tax benefits for contributions on a Roth IRA, many investors have no problem with these IRA contribution limits.

While, again, the opportunity to convert to a Roth IRA has been a big topic throughout the previous months, there are some advisers who have suggested that investors who may be in the position to do so should simply diversify their retirement planning and obtain a separate Roth IRA, or other retirement account, as an alternative form of retirement savings. It’s understandable that this may not be an option for everyone, but before investors turn to converting to a Roth IRA or even choosing a retirement plan, it has often been beneficial for investors to see what retirement account or various accounts may be available for their particular situation and the financial goals they may have for when they retire.