Want more tax-free income? Maximize your Roth IRA in 2021!

If you are tired of paying taxes on every dollar you earn, you must explore the benefits of a Roth IRA (Individual Retirement Account). It’s a tax-free donation on income that comes with built-in benefits that you can enjoy now and in the future. You just need to make sure that you have earned income and that you fall below the income thresholds that prevent some from making Roth contributions.

You won’t get any tax relief on the money you use to fund the Roth IRA, but all of your income grows tax-free. After you turn 59 and a half and follow the five-year rule, every penny in your Roth IRA is yours – no need to share your earnings with the IRS. If you’ve ever dreamed of creating a six or seven figure retirement fund, the Roth IRA makes that dream possible without the uncertainties of paying taxes later. But it all starts with one simple step: maximizing your annual contributions.

The Power of Roth IRA Contributions

While there are a variety of savings options available – and you’ve probably had access to your employer’s retirement accounts – there’s a reason the Roth IRA reigns supreme over other accounts: you can choose. your investments and withdraw whatever you put in. at any time.

Many people automatically assume that if you get the money in your Roth IRA before retirement, you will be penalized and have to pay taxes. This is not the case. This rule only applies to income in your account that has been withdrawn prematurely. If you contribute $ 3,000, you can still withdraw the $ 3,000 without worrying about timing or tax restrictions.

For 2021, you can contribute up to $ 6,000 to a Roth IRA if you’re under 50 and have earned income. But if you’re 50 and over, you get a special catch-up contribution of $ 1,000 that allows you to contribute up to $ 7,000 to a Roth IRA. You are not required to pay a specific amount each year. You simply cannot contribute more than the maximum allowed.

Maximize your tax-free income

The ability to withdraw contributions is an attractive feature of the Roth IRA, but maximizing your contributions comes with even greater rewards. You will have the opportunity to invest in high quality assets which will give you a better chance of earning more tax-free income in your account. This is the secret to enjoying all the benefits that the Roth IRA has to offer.

Imagine if you contributed $ 6,000 to your Roth IRA in 2020 and immediately bought shares of You’re here (NASDAQ: TSLA). To say your account more than doubled would be an understatement. Your Roth IRA balance would have increased by over 720% by the end of the year, allowing you to easily turn $ 6,000 into almost $ 50,000. That’s $ 44,000 in tax-free profits that you can enjoy later!

Start as early as possible

It’s tempting to put off planning for retirement until a later date, but think of it this way: The earlier you start, the more tax-free income you can accumulate.

You should treat the Roth IRA as a limited time offer account that may not last forever. Simply put, receiving a huge increase in your salary may disqualify you from making direct contributions to a Roth IRA because your income exceeds the thresholds.

That’s why you should start maximizing your account now if you qualify. Don’t stop there – open an account for your children too! You don’t have to be a certain age to take advantage of a Roth IRA. Even a three-year-old can have a Roth IRA account, but there is a caveat: Anyone who contributes to a Roth IRA must have earned income for the year. If you have made less than the maximum contribution ($ 6,000 for 2021), your contribution is limited to the amount of your earned income. So if your child made $ 2,000 through modeling and acting activities, you could contribute up to $ 2,000 to a Roth IRA on behalf of the child. Opening a Roth IRA for a child at an early age is one of the easiest ways to help your child become a millionaire before retirement.

Don’t leave money on the table

The Roth IRA’s tax-free income feature is a big deal. Taxes are the biggest expense for most people. The less tax you have to pay, the more money you can save to meet your wealth building goals.

Start planning now. If you want to contribute the maximum amount this year, all you need to do is save $ 500 per month for 12 months. Then invest in assets that will allow you to create an additional stream of tax-free income that you can enjoy in retirement!