Investing In A Roth IRA For Workers Nearing Retirement–Benefits From Additional Retirement Accounts?

There are investors who have questioned whether certain types of retirement planning vehicles can be used once an investor has reached a certain age, but there have been arguments made for retirement planning accounts like Roth IRAs which can be accessed at various points within the life of an individual and provide benefits as a way of diversifying one’s retirement fund. While it may be difficult for someone to invest in a single retirement account later in life where no other retirement planning has been implemented, there may be benefits for individuals who are nearing retirement who may have extra money and want to put it to use.

In 2010, conversions to Roth IRAs were one of the hot topics as rules allowing more investors to convert alternative investment accounts into a Roth IRA had many looking  at whether this move would be beneficial in terms of their retirement planning goals. Roth IRAs obviously are beneficial for those who can take advantage of this type of account due to the fact that earnings from Roth IRA can be withdrawn tax-free and there are no required distributions at a certain age.

However, there is no argument that investors should start planning for their retirement early, as this gives them a better opportunity to not only save up the money that may be needed for expenses later in life, but there are often more opportunities to diversify through retirement accounts like 401(k)s and IRAs. Yet, Roth IRAs for those who are nearing retirement can be helpful as, in certain cases, investors may have additional funds on hand which can be put to good use like diversifying their retirement portfolio.

Obviously, if an individual is relatively debt-free or has perhaps paid off their home loan, some have turned to putting these funds towards retirement vehicles like Roth IRAs, as funds from other retirement accounts, like a 401(k) or traditional IRA, may be used to meet expenses earlier into one’s retirement and a Roth IRA may continue to build while expenses are met from alternative forms of retirement income.

While there have been opportunities for some investors to convert other forms of retirement accounts to a Roth IRA, this is not always in one’s best interest as taxes levied on this conversion may offset benefits from the savings one would gain from withdrawing earnings tax-free.  However, men and women who may be nearing retirement, and already have retirement investments in place, have seen benefits from Roth IRAs as a supplement to retirement savings, but this issue will differ from one investor’s situation to another and will take analysis on the part of the investor to see whether this type of investing is a good idea for their financial situation.