This Often-Overlooked Way to Fund Your Roth IRA Has Many Advantages

By Ken Nuss6 days ago

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A Roth IRA is a uniquely powerful retirement savings tool, because you wont pay taxes on the money you withdraw during retirement. An annuity is a way of generating guaranteed income. Put them together, and you have a powerful retirement protection tool that can provide guaranteed income for life, with a big plus: Its completely tax-free.

Anyone may roll over part or all of an existing Roth to a Roth annuity. You may transfer all or part of the funds in an ordinary Roth to a Roth annuity. While there are income and contribution limits for new money going into a Roth IRA, they dont apply to rollovers including rollovers to a Roth annuity.

Different types of annuities accomplish different things and have distinct pros and cons like the Swiss army knife of personal finance. Since theyre so varied, one type or another can work well for a Roth IRA. Investment choices, fees and contract provisions vary, so work with an annuity agent who will educate you about your choices and clearly lay out the pros and cons.

What kind of annuity works for a Roth? It depends on which stage of your financial life youre in. In the accumulation stage, youre building wealth for retirement. In your decumulation stage, youre retired and receiving income from your savings.

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