How to Maximize the Benefits of a Roth IRA

The purpose of a Roth IRA is for you to save for retirement. However, the IRS allows a bit of flexibility within these accounts that make them highly attractive. For example (and providing you qualify) you can take penalty-free withdrawals for buying a home for the first time, medical expenses, college, and even for emergencies. Read on to discover the top features and how to maximize the benefits of a Roth IRA.

And, while you’re reading remember that if you open a Roth IRA before filing your 2018 taxes, you get a jump-start on the 5-year rule. (More on that below.)

Couple reviews paperwork for Roth IRAs to assess the benefits for their retirement plan.Why consider a Roth IRA?

  • You don’t qualify for a deduction of your traditional IRA contributions.
  • Your income bracket dropped.
  • Returns on investments grow tax free.
  • You can take distributions after you turn 59 ½ and have owned the account for five years.
  • You can make contributions even after retirement age as long as you work and have earned income.

Anyone with earned income can open a Roth IRA.

As long as you qualify, you can open and start to maximize the benefits of a Roth IRA today. And this includes any children you have who work, regardless of their age. But there are income limits in place that determine your eligibility.

In 2019 if you’re a single filer, your modified adjusted gross income (MAGI) must be less than $137,000 to contribute. If you’re married filing jointly, your MAGI must be less than $203,000. There are other income eligibility requirements that this article in NerdWallet provides in detail.

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One of the best benefits of a Roth IRA:

The Roth five-year rule.

You have to own the account for at least 5 years (even if you’re 59 ½ or older) before you can take tax and penalty-free distributions on dividends and earnings.


You’re able to withdraw your contributions (not earnings) before 59 ½ with no penalty. In fact, thanks to this particular five-year provision, quite a number of people establish a Roth as somewhat of an emergency savings account knowing they can take distributions this way. They are able to save for retirement and accrue funds they can access in case an emergency arises.


Roth IRA funds can pay for your education. Yes! A Roth IRA can be used to get an early start on saving for retirement and as a vehicle to save for college. These accounts are becoming popular with younger generations as a way to avoid racking up exorbitant student loans. IRS Publication 590-B outlines the provisions that allow for penalty-free distributions to pay qualified, higher educational expenses. And, of course, you can take advantage of this before you reach the age of 59 ½. Again, you have to have owned the account for five years. If you have, you can fund your education, your spouse’s, children’s, and grandchildren’s using funds from the account.

Other qualifications for penalty-free distributions:

  • If you are permanently and totally disabled.
  • If you are a first-time home buyer, you may be eligible take out up to $10,000 to purchase or build your first home. If you’re married, your spouse may withdraw $10,000 from your joint account or her own IRA, as well.
  • You’ve got medical expenses (that are not reimbursed) that total more than 10 percent of your adjusted gross income (or 7.5 percent if you and/or your spouse were born before 1954).
  • As long as the distribution(s) do not exceed the total cost of your medical insurance due to unemployment for a period.

As you can see, there are many ways to maximize the benefits of a Roth IRA. If you qualify and want these advantages to be yours, you have time to open and fund one to count for 2018 if you haven’t filed your income taxes yet. A bonus in doing so—you’d get a jump-start on the five-year rule because the IRS will recognize the year 2018 as one of the five!

To find out how you can use a self-directed Roth IRA to invest in alternative assets like real estate, private equity, startups and more contact Advanta IRA at 800.425.0653.

About Scott Maurer

Scott Maurer, Vice President of Sales for Advanta IRA, is a recognized expert in the field of self-directed IRAs. With a law degree from the University of Florida and as a designated Certified IRA Services Professional (CISP), Scott’s keen understanding of rules and regulations fuels his passion to educate others on the power of investing in alternative assets using self-directed IRAs. Scott is a frequent guest on retirement and investing webinars and podcasts, and he has shown thousands of individuals how to achieve financial freedom by teaching them how to use their retirement funds to invest in private placements, real estate, private lending, and more. Throughout his two decades in the industry, he has watched numerous unique investments unfold, giving him great perspective of what is possible when people take control of their retirement funds and investing decisions.