The current landscape and rules around retirement savings provide a number of strong incentives for you to consider setting up a Roth IRA this year.
div > div.group > p:first-child"> Americans rely more and more on saving in their employer-sponsored 401 plans — which are heavily funded by tax-deferred salary deferrals from the employee and tax-deferred employer matching contributions.
The five-year rule makes it wise to set up a Roth IRA as soon as possible. As soon as money goes into any Roth IRA, the five-year period begins. The rule allows for aggregation back to the first Roth IRA contributed to in order to satisfy the five-year rule. This means you need one Roth IRA to satisfy the five-year rule for any other Roth IRAs opened in the future.
If you make too much money, you will not be able to directly contribute to a Roth IRA. For single filers in 2018, that income threshold starts at $120,000 and ends at $135,000. For married people filing jointly — and qualifying widowers — that income threshold starts at $189,000 and ends at $199,000.
Diversification is crucial to smart long-term financial planning. It doesn't matter if it's within asset classes, among asset classes or across different tax treatments, diversification helps. We don't know for certain what the future holds, but by diversifying we reduce the risk of relying solely on the outcome of one event.
While I just said we don't know where tax rates will be in the future, there are strong indications tax rates are lower today than they will be soon. You can see clear needs for revenue increases at both the state and federal levels with state budgets feeling a lot of pressure, underfunded state pensions needing additional funding, Social Security needing more funding and the federal deficit increasing.
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