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COVID Relief Roth IRA?

1 year and couple of bills later Congress is sending out more aid.  Many families are putting that to good use by making a mortgage payment, paying off a credit card, or even helping out friend.  But many people are getting this aid and want to put it to work.  Since the payment might be substantial, it makes a lot of sense.  A person filing single, earning under $75,000, could see $1,400. A married family of four, who fall under the $150,000 threshold, might net out $5,600, (4X $1,400=$5,600).   And as of this article, it appears to be tax free (although it makes sense because it is kind of your own money back, right?)  If you are paying an effective tax rate of 20%, that is like getting $1,750 before taxes or $7,000 if you are that family of four!

So where to put that money?  The Roth IRA might be the best spot for it.  Not only did you receive tax-free money, if you follow all the rules correctly, it will grow tax free and come out tax-free after age 59 ½.

This can be a great retirement account.  Interestingly there are some little-known Roth benefits.  It may not show up on the FAFSA form for college aid.  Your investment comes out first and is penalty free, even before age 59 ½.  You can leave it in a money market and invest it later if you are worried about “timing” the market or you might need it.  There are no Required Minimum Distributions on a Roth IRA.  Your beneficiaries even get it federal income tax free!

A couple of items to consider. You cannot deduct a Roth IRA investment.  You must earn under a certain income threshold to be able to invest in a Roth.  You must have a paycheck, salary, or some type of earned income or your spouse did. Retirees beware, the government might not let you put the money in a Roth if you do not meet their strict standards.   

Clark Associates Financial Planning, Inc. can help you open a Roth for the current or even the last tax year if you contact us soon.  Give us a call to see how you can turn this new money into something to help your future self!

609-567-1884

[email protected]

Neither ProEquities nor its representatives or affiliates offer tax or legal advice. Please consult a tax or legal professional before making any decisions.

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Advisory services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a Registered Broker-Dealer, Member FINRA and SIPC).
Clark Associates Financial Planning, Inc. is independent from ProEquities, Inc.

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