A Roth IRA is an important component of your retirement portfolio. In this episode of Your Life Simplified, Valerie Escobar, senior wealth advisor, and Michael MacKelvie, wealth advisor, discuss mistakes that can be made when investing in a Roth IRA and how to avoid them. Topics discussed include spousal contributions, Roth 401k options, the 5-year rule and contribution eligibility.

0:00 Intro
1:21 Missing Roth Opportunities
5:00 Cost-Basis
6:30 5-Year Rule
7:46 Backdoor Roth IRA
10:11 Contributing When Not Eligible
13:20 Outro & Disclosures

#retirement #rothira #investing

For more information, please visit us online at

Subscribe and listen to our podcast, Your Life Simplified
Apple Podcasts –
Google Play –

CONNECT WITH US ON SOCIAL
LinkedIn –
Facebook –
Twitter –
Instagram –

=============================================

These videos are limited to the dissemination of general information and are not intended to be legal or investment advice. Nothing herein should be relied upon as such. The views expressed are for informational purposes only and do not take into account any individual personal, financial, or tax considerations. There is no guarantee that any claims made will come to pass.
Disclosures: …(read more)

LEARN MORE ABOUT: IRA Accounts

CONVERT IRA TO GOLD: Gold IRA Account

CONVERT IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

In recent years, the popularity of Roth IRAs has skyrocketed. The ability to contribute after-tax money that grows tax-free and can be withdrawn tax-free in retirement has captivated many investors. While Roth IRAs offer substantial benefits, there are also several costly mistakes that individuals can make. In this article, we will explore 5 costly Roth IRA mistakes to avoid.

1. Failing to Maximize Contributions:
One common mistake is failing to maximize contributions to your Roth IRA. As of 2021, the annual contribution limit is $6,000 for individuals under the age of 50 and $7,000 for individuals aged 50 and above. Contributions to a Roth IRA can only be made from earned income, so if you have the means to save more, it is crucial to take advantage of the maximum allowable contribution each year.

2. Not Understanding Income Limits:
While Roth IRAs allow for tax-free growth, not everyone is eligible to contribute directly to a Roth IRA. High-income earners may face income limitations. For 2021, single filers with an Adjusted Gross Income (AGI) exceeding $140,000 and joint filers with an AGI exceeding $208,000 are not eligible to contribute to a Roth IRA. However, there is a “backdoor” Roth IRA strategy available. Consult a financial advisor for guidance on navigating income limitations.

3. Neglecting to Diversify Investments:
One of the biggest mistakes investors make is neglecting to diversify their investments within their Roth IRA. While it can be tempting to invest all your money in a single asset, such as stocks, it is crucial to maintain a diversified portfolio to spread risk. Allocating investments across different asset classes, such as stocks, bonds, and real estate, can improve the chances of long-term growth and mitigate potential losses.

4. Early Withdrawals:
Roth IRAs were primarily designed to help individuals save for retirement. A significant mistake individuals can make is withdrawing funds prematurely. Although contributions can be withdrawn at any time without penalty, earnings withdrawn before age 59 ½ may be subject to income tax and a 10% early withdrawal penalty. It is crucial to let your money grow and only access it when you reach retirement age, allowing for maximum tax-free growth potential.

5. Failing to Update Beneficiaries:
Lastly, failing to update beneficiary designations can have severe consequences. In the event of your passing, the funds in your Roth IRA will pass directly to your designated beneficiary. If your beneficiary designation is not up to date, your funds may end up in the hands of someone you did not intend. It is essential to review and update your beneficiary designations periodically or after significant life events such as marriage, divorce, or the birth of a child.

In conclusion, Roth IRAs offer incredible benefits, but making mistakes can cost you both financially and emotionally. By avoiding these common mistakes, you can maximize the benefits of your Roth IRA and set yourself up for a secure retirement. Remember to take advantage of the maximum allowable contributions, understand income limits, diversify investments, refrain from premature withdrawals, and update beneficiary designations regularly. Consult with a financial advisor to ensure you are making the most of this powerful retirement savings tool and avoiding these costly mistakes.