Planning for retirement involves making smart decisions about where and how to invest your money. A Roth IRA stands out as a powerful tool for building tax-free wealth, offering unique advantages over traditional retirement accounts. Whether you’re looking to minimize future tax burdens, gain flexibility with withdrawals, or leave a tax-free inheritance, understanding the benefits of a Roth IRA can help you make informed financial choices.

1. Tax-Free Growth and Withdrawals

One of the most attractive aspects of a Roth IRA is that your investment grows tax-free. When you retire, withdrawals—including both contributions and investment gains—are also tax-free, provided you meet the age and holding period requirements. Additionally, Roth IRAs do not count toward Provisional Income calculations, meaning they do not increase the taxable portion of your Social Security benefits.

Want to learn more about managing taxes in retirement? Read How to Minimize Taxes on Your Retirement Income.

2. Access to Contributions Anytime

Unlike traditional IRAs and 401(k)s, a Roth IRA allows you to withdraw the money you contributed at any time, without taxes or penalties. This makes it a flexible option if you need access to funds before retirement. Earnings, however, are subject to withdrawal restrictions. To avoid penalties and taxes, you must:

• Be at least 59½ years old
• Have had the account for at least five years

There are certain exceptions for early withdrawals, such as using funds for a first-time home purchase or qualified education expenses.

If you’re thinking about early retirement, read The Pros and Cons of Withdrawing Retirement Funds Early.

3. No Age Restrictions on Contributions

While traditional IRAs prevent you from contributing after age 73, a Roth IRA allows you to keep contributing for as long as you have earned income. This makes it an excellent option for those who continue working into their later years.

Not sure if you’re saving enough for retirement? Check out How Much Should You Save for Retirement?.

4. No Required Minimum Distributions (RMDs)

Many retirement accounts require withdrawals to begin at age 73, potentially forcing you to take income when you don’t need it, which can increase your tax burden. Roth IRAs, however, have no required minimum distributions, allowing you to keep funds invested as long as you like. This makes it a valuable tool for wealth preservation and estate planning.

For more strategies on RMDs, read How to Manage Required Minimum Distributions in Retirement.

5. Tax-Free Inheritance for Beneficiaries

A Roth IRA can also provide a tax-free inheritance for your beneficiaries. If the account has been open for at least five years, your heirs can inherit the funds tax-free. This makes it an effective way to pass on wealth while minimizing tax consequences for your loved ones.

Curious about legacy planning? Explore Estate Planning and Retirement: How to Leave a Lasting Legacy.

6. Contribution Limits

For 2025, the maximum contribution limits for a Roth IRA are:

• $7,000 if you are under 50
• $8,000 if you are 50 or older (includes a $1,000 catch-up contribution)

If you are married and filing jointly, you can also contribute on behalf of a spouse who does not earn income, allowing your household to double contributions within a tax year.

Check out Retirement Contribution Limits for 2025 to ensure you maximize your savings.

7. Income Limits for Eligibility

Not everyone can contribute directly to a Roth IRA due to income restrictions. For 2025:

• The phase-out range for married couples filing jointly begins at $236,000 and ends at $246,000.
• For single filers, contributions phase out between $150,000 and $165,000.

If your income exceeds these limits, you will not be able to contribute directly. However, there are alternative strategies available.

8. Using a Backdoor Roth Strategy

If your income exceeds the Roth IRA contribution limits, you may still be able to benefit from Roth savings through a backdoor Roth conversion. This involves making a non-deductible contribution to a traditional IRA and then converting those funds to a Roth IRA. While this strategy allows high earners to take advantage of tax-free growth, it does require careful tax planning, as converted funds may be subject to income tax. Consulting with a financial professional is recommended to determine if this is a suitable approach.

To learn more about this strategy, check out Backdoor Roth IRA: Is It Right for You?.

Is a Roth IRA Right for You?

A Roth IRA can be a powerful part of a well-rounded retirement strategy, offering flexibility, tax advantages, and long-term growth potential. However, whether it fits your financial plan depends on factors such as your tax bracket, income level, and retirement goals.

At Oakmont Advisory Group, we help individuals and families navigate their retirement options and develop strategies that align with their financial future. If you would like to explore whether a Roth IRA is the right choice for you, schedule a complimentary consultation with one of our financial advisors today.

For more retirement planning insights, visit our Retirement Resource Center.