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Is a Roth IRA a Good Fit for Your Goals

Traditional and Roth individual retirement accounts are both solid options for retirement savings. A Roth IRA offers tax advantages when you withdraw your funds, while contributions to a traditional IRA are tax-deferred until you take distributions. Comparing both IRA options can help you make an informed decision.

ROTH BASICS

Contributions to a Roth IRA are made with after-tax dollars. That means you won’t get a tax deduction for your contributions. However, the money in your account grows tax-free. Withdrawals are also tax-free, providing you with a tax-free income stream in retirement. The maximum contribution to Roth and traditional IRAs in 2026 is $7,500, or $8,600 for people aged 50 or older.

NO REQUIRED DISTRIBUTIONS

Traditional IRAs require minimum distributions from your account once you reach age 73. In contrast, a Roth IRA has no minimum distribution requirement—ever. If you don’t need the funds in your account, you can leave it untouched, so it continues to grow tax-free during your lifetime and then pass the Roth IRA tax-free to your heirs.

INCOME LIMITS

You cannot contribute to a Roth IRA if your modified adjusted gross income (MAGI) exceeds the applicable limits. In 2026, the income limit for single and head-ofhousehold filers to contribute the maximum amount is $168,000. Married joint filers can contribute the full amount if their MAGI is $252,000 or less. THE FIVE-YEAR RULE Contributions to a Roth IRA can be withdrawn at any time, but earnings distributed before age 59-1/2 may be subject to a 10% penalty and income tax unless you meet an exception. After age 59-1/2, you can withdraw both contributions and earnings without penalty once the account has been open for at least five tax years.

HOW TO DECIDE

Consider a Roth IRA if you expect to be in a higher tax bracket in retirement. Because you’ll pay taxes on the conversion, it’s usually best to do it when your income dips. Talk with your trusted advisors so you can make an informed decision together.

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July 2026 Client Profile

Emily, a high school senior, just landed a full-ride college scholarship covering every dollar of tuition, fees, books, and room and board. Her parents, Andrew and Leah, open the statement and see $75,000 still sitting in the 529 plan you started for Emily when she was born.

Under the SECURE 2.0 rule, you can roll up to $35,000 lifetime— tax- and penalty-free—straight into Emily’s Roth IRA. Because the account is already 18 years old and meets the five-year holding rule, you transfer $7,500 this year (the 2026 annual limit, assuming Emily has earned income), then repeat annually until the $35,000 cap is reached. The money now works for her retirement instead of sitting idle.

For the remaining $40,000, you withdraw an amount equal to the scholarship value, avoiding the 10% penalty (though earnings are taxable as ordinary income). You can use the funds for a gap year, study abroad, or graduate program later. Andrew and Leah turned “leftover” college savings into a powerful retirement head start for Emily.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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June 2026 Client Profile

Meet Sarah Jones, a 55-yearold marketing director in New York. Her employer (a mid-sized tech firm) paid her $165,000 in salary and reported it on her 2025 Form W-2. This exceeds the IRS adjusted threshold of $150,000 for the prior year.

The standard elective deferral limit is $24,500, and as someone over 50, Sarah qualifies for an $8,000 catch-up contribution. Her regular $24,500 deferral can still be pre-tax (reducing 2026 taxable income) or Roth at her choice. However, because her 2025 FICA wages from this employer topped $150,000, any catch-up amount (the extra $8,000) must be designated as Roth (after-tax). She pays income tax on that $8,000 in 2026, but qualified withdrawals (including growth) are tax-free in retirement.

Sarah reviews her plan documents, and luckily, it includes a Roth 401(k) option. She updates her contribution election to allocate the catch-up amount to Roth. Without Roth accounts in the plan, she wouldn’t be able to make the catch-up contribution at all.

This change means high earners like Sarah won’t get an immediate tax deduction on catch-ups, but it creates taxfree growth for the future.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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Start Your College Grad on the Path to Becoming a Millionaire

You may be able to do this utilizing any unused funds in the student’s 529 Plan. The IRS now allows rollovers of these funds to a Roth IRA in the child’s name.

REQUIREMENTS

You must have owned the 529 account for at least 15 years before rollovers are allowed. Contributions made in the five years before distributions start — including the associated earnings — are ineligible for a tax-free rollover. Rollovers can’t exceed the 2024 annual Roth contribution limit ($7,000/$8,000 for ages 50 and older).

The lifetime 529 rollover limit is $35,000, so you’d have to do a rollover annually for several years. As the owner of the Roth IRA, your graduate must have earned income at least equal to the amount of the annual rollover.

THE MILLIONAIRE PART

Look at the hypothetical example (chart) of making rollovers of $35,000 in remaining funds over five years. It assumes the annual contribution limit remains $7,000, your child makes no additional contributions, and the IRA earns a hypothetical 7% compounded interest monthly for 45 years. Consult your tax advisor about your situation.