What is a Roth IRA and do I need one?

A Roth IRA is an IRA that is not tax deductible when you make contributions. All growth and income is tax-free. You do not have to take Required Minimum Distributions (RMDs) when you reach age 72. You can remove your original contributions at any time, tax- and penalty-free. You can contribute $6,000 (or $7,000 if age 50+) per year to any IRA (for tax year 2021).

Roth IRAs are an important part of wealth planning, particularly for High Income Professionals (HIPs) because of the potential for tax-free growth. The earlier you begin, the better, especially since you are likely to be at a lower tax bracket when you are young.

Roth IRAs are also an important estate planning tool for physicians. That’s because physicians tend to have physician or other high-income children. The more funds you have in a Roth IRA, the lower your RMD’s will be at age 72, and the lower your taxable income will be. Your Roth IRAs can be left to your survivors 100% income tax free – which is a wonderful thing, especially when they are in a high income tax bracket.

Roth IRA Conversions, Part 1 of 2: How to Build Wealth

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