The Timeline Of Your Roth Ira: What To Expect Heading Toward Retirement

Individual retirement accounts (IRAs) are a valuable way to begin planning for your life after employment. In addition to earning interest on the money youve invested, youll also receive valuable tax benefits that can add a significant boost to your annual income. While traditional IRAs give you these tax benefits for the contributions you make to your investment account, a Roth IRA gives you benefits when you go to withdraw the money. Additionally, Roth IRAs offer flexibility and convenience that traditional IRAs cannot. If youre thinking about opening up a Roth individual retirement account, take a look at what you can expect over the lifetime of your investment.

Your Beginning Investment Period (Before Age 50)

Many people begin contributing to their IRA accounts before age 50, as this is a good way to save money for retirement. Before age 50, your contributions are limited to 5,000 dollars per year. You also cannot withdraw money from your IRA without penalty, so be careful not to contribute more than you can afford to do without. If you have a Roth IRA, youll continue to pay taxes on your full income amount during this time period. However, many people prefer to pay their taxes while theyre saving, as they still have regular sources of income to rely on.

Nearing Retirement (Ages 50-59 1/2)

From ages 50-59 1/2, your IRA will continue to work in a similar fashion. However, some IRAs allow you to begin contributing more than 5,000 dollars per year during this timeframe. If this applies to you, this is a good time to make a greater push and to save as much as you can. During this time, you should also be calculating the rest of your investments and monitoring your progress toward your retirement goals. Calculate the status of your IRA balance, your money market accounts and certificates of deposit, and any other savings vehicles youre using. Additionally, look into the value of your home and other assets in order to determine their potential value at your retirement.

The Start of Retirement (Ages 59 1/2-70 1/2)

Once you reach age 59 1/2, you can begin withdrawing money from your IRA without penalties. Fortunately, if you've chosen a Roth IRA, you wont have to worry about paying taxes on any of these withdrawals. Though most people qualify for tax-free withdrawals, make sure youre eligible at this time. If youre in a higher tax bracket during retirement, tax-free withdrawals are especially beneficial. Youll enjoy greater savings on your taxable income, while also receiving the benefits of the interest youve accrued over the lifetime of your investment. Of course, you arent required to begin taking distributions from your IRA yet if youd prefer to let the interest continue to grow. You can also continue to make contributions to your IRA in order to boost its total value.

Enjoying the Rest of Your IRA (Age 70 1/2 and Beyond)

Once you reach age 70 1/2, youll notice few changes if youve invested in a Roth IRA. Traditional IRAs typically limit contributions at this point, and also force you to begin taking distributions. Your Roth account has greater flexibility, and you can continue to add money or to let the interest grow on the investments you've already made. Additionally, you can set up your Roth individual retirement account so that it will be passed on to your spouse or an heir. Keep in mind that the beneficiary of your account will be subject to withdrawal limitations. However, this is a great way to pass along extra money to your loved ones when youve already retired comfortably.