Roth IRA can help you save for retirement and your children’s education
Chris and Heather want to help their young son go to college someday. They also want to retire when they’re 65 – but they don’t know how they can save for both dreams.
College will come sooner, but they’ll need more money for retirement. And diverting money from their retirement now could cost Chris and Heather many years of earning interest on their money – and interest on that interest.
A Roth IRA could provide flexibility. With a Roth IRA, you can contribute up to $5,500 per year ($6,500 for ages 50 plus) using after-tax dollars. You can withdraw your contributions tax-free at any time, and you can withdraw earnings tax-free after your Roth IRA has been established for five years and you reach age 59 1⁄2.
Consider these scenarios:
- If your child does not go to college, you can leave the money in your Roth IRA for retirement.
- Likewise, if your child receives a full scholarship, the money left in your Roth IRA will continue earning interest toward your retirement.
- If you need to withdraw money to help your child with college expenses before you reach age 59 1⁄2, earnings will be subject to ordinary income taxes but NOT the IRS penalty for premature withdrawals.
Save for the future while maintaining some flexibility for college expenses. A Modern Woodmen financial representative can help you determine if a Roth IRA could help you reach your goals. The sooner you start saving, the more money you’ll have toward making your family’s dreams come true.
Let’s start the conversation.