When it comes to retirement planning, we’re sure as a teacher you’ve heard the term “Roth” but may not be sure what it is, or if it’s the right solution for you. Based on our experience working with teachers, we can tell you that generally, a Roth IRA is one of, if not the best retirement savings options for teachers.
A Roth IRA is a retirement account that you make contributions to on what we call a post-tax basis. This means the money has already been taxed in your paycheck, so you don’t get a tax deduction for it. However, that’s okay because the money you contribute to a Roth IRA, once inside, is invested and the growth and income are not taxed. Then, when you make distributions in retirement, they are tax-free.
This means that the money you’re able to put into a Roth IRA is money that won’t be taxed for the rest of your life! Plus, with lower tax brackets in place through 2025, there may never be a better time than now to contribute.
There are a few caveats to watch out for. First, there is an income limit, so if you make too much, you’ll have to use an alternative strategy to take advantage to make a Roth work for you. Second, If you’re in a high tax bracket now, but expect it to drop when you retire, you’ll want to consider contributing to a pre-tax retirement account, to get the more valuable tax deduction.
A Roth IRA isn’t the only option, as Roth Strategies are a whole category in themselves that include potential 401(k), 403(b), backdoor, and conversion strategies that can benefit you.
If you’d like to learn more and talk to a Financial Planner about how Roth strategies can benefit you as a teacher, don’t hesitate to give us a call or drop us an email.