How to Maximize Your Roth IRA Contributions
Many people are unaware of the importance of healthy spending and saving habits, as well as how to set up and contribute to an IRA account. When it comes to retirement planning, an IRA account is essential for saving money and building wealth.
A Roth IRA account allows you to contribute $5,500 annually and up to $6,500 if you’re over 50. Although there are limitations on how much money you can put into your account, there are strategies you can utilize to make the most out of your Roth account.
Convert Other Assets into Your Roth IRA
There may be a limit on how much of your income you can contribute to your Roth IRA account, but there’s no dollar limit when it comes to converting other assets such as your 401(k) and traditional IRA accounts to your Roth. Applying conversions will help you contribute more money to your account.
There are three steps in converting a traditional IRA to a Roth account:
- A 60-day rollover
- Same trustee transfer
A 60-day rollover requires transferring the money within the timeframe of 60 days to avoid the 10% early withdrawal penalty. Trustee-to-trustee means appointing the trustee of a traditional IRA to directly transfer the money to your Roth trustee. Lastly, same trustee transfer is setting up a Roth account within the same institution of your traditional IRA and directly transferring the money.
Use the Dollar Limit to Your Advantage
Many people don’t contribute enough to their Roth IRA, and the difference will show when they retire. If you want to maximize your account, you need to contribute as much as you can. As the contribution limit grows, you should match it every year to build an even greater total.
It’s best to not skip years either; skipping even one year can lower your overall total over time. You don’t need to always reach the dollar limit if you can’t afford it, but it’ll be helpful in the long run if you can max out your contributions annually.
Invest in Stocks
After converting your assets and maxing out your contributions, the next step you should take is investing in high-quality dividend growth stocks. Roth IRAs shelter your investments from dividend taxes and capital-gains taxes, making them well worth investing in.
One way to choose a stock to in which to invest involves researching stocks that show a long history of dividend payments. This will show the company has financial strength and continues to pay its shareholders consistently. With this strategy, you’ll be able to choose recession-resistant stocks and gain money long-term.
Contributing to your Roth IRA account with these tips will ensure that you’ll make the most out of your account and save enough money for retirement.
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At Macino Financial Services we assist our clients with maximizing their Roth IRA contributions to ensure retirement is relaxing. Give us a call at 419.491.0909 to schedule your complimentary review.
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