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Retirement Savings Beyond 401(K) Investing- The Roth IRA

As you may have heard there is a movement among personal finance blogs to get the word out about Roth IRAs. And while we here at Smart401k encourage everyone to contribute as much as they can to their 401(k), we also realize there are additional options for retirement saving beyond the 401(k). One of these options is the Roth IRA.

But before you get signed up for a Roth IRA, here is a little information on this increasingly popular retirement savings vehicle.

Not everyone is eligible for a Roth IRA- Your eligibility for a Roth IRA is largely dependent on your annual adjusted gross income (NYSE:AGI). This table from the IRS displays the criteria needed to be eligible for a Roth IRA.

If You Have Taxable Compensation and Your Filing Status Is…

And Your Modified AGI Is…


married filing jointly or qualifying widow(er)

Less than $173,000

you can contribute up to the limit.

at least $173,000 but less than $183,000

the amount you can contribute is reduced.

$183,000 or more

you cannot contribute to a Roth IRA.

married filing separately and you lived with your spouse at any time during the year

zero (-0-)

you can contribute up to the limit.

more than zero (-0-) but less than $10,000

the amount you can contribute is reduced.

$10,000 or more

you cannot contribute to a Roth IRA.

single, head of household, or married filing separately and
you did not live with your spouse at any time during the year

less than $110,000

you can contribute up to the limit.

at least $110,000 but less than $125,000

the amount you can contribute is reduced.

$125,000 or more

you cannot contribute to a Roth IRA.

There are contribution limits to a Roth IRA- For 2012 the maximum you can contribute to all of your traditional and Roth IRAs is $5,000 ($6,000 if you're age 50 or older).

You control the contributions- This procedure may be new for some, but with a Roth IRA you control the setup of your contributions. From how much to how often and even setting up automatic contributions, the responsibility lands squarely on your shoulders.

Roth contributions grow tax free- While your contributions are not tax deductible, the money you contribute will generally grow tax free and will not be subject to taxes upon distribution.

You can postpone distributions as long as you want- Another important note about the Roth IRA regarding its distribution, unlike other retirement plans you are not required to begin distributions at a particular age. When you choose to being distributions is entirely up to you.

There are more investing options- With a Roth IRA you have the ability to select from a wide range investment options including mutual funds, stock, bonds and even gold and real estate. This freedom however often requires more legwork and research on your end to make sure you are making the best choices for you and your nest egg.

Many investors look to contribute to the Roth IRA because it offers a different tax set-up than the traditional 401(k) or IRA, offering tax diversification to those savers.

If you interested in getting started, most large financial companies including banks, mutual fund the companies and brokerages offer a Roth IRA. Make sure to do your homework and understand the products being offered by each company, especially the fees associated with their Roth IRA. These fees and the way they are structured are usually the biggest difference between most institutions.

Have questions about 401(k)'s or Roth IRA's? Get in touch with our advising team at or 877.627.8401.

Evan Davis

Marketing Associate

*Important Note: Nothing in this article should be construed as tax advice. If you have any questions regarding whether a Roth IRA may be right for you, the tax consequences relating to utilizing any particular investment account option or any other tax matter, please contact a qualified tax professional.

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Smart401k is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at