Self-Employed? You Too Can Make Roth IRA Contributions

By Brendan Hughes0 Comments

One benefit of a Roth IRA is the tax-free withdrawals (if you qualify) when the account owner reaches 59½.  This could end up being an advantage to self-employed people who might sell their business later in life and possibly fall into a higher tax bracket. While contributing to a Roth IRA doesn’t allow for yearly tax deductions, if you are self-employed and believe you’ll still be in a high tax bracket well into retirement years, the tax-free withdrawals might make good financial sense.

A recent Business.com article, “How the Self-Employed Can Make Roth IRA Contributions” by Elizabeth MacBride notes that a large portion of the U.S. workforce is self-employed, adding it is important for them to plan for their future. The article touches on the benefits of the Roth IRA for those that work for themselves and includes four important things to know when opening a Roth IRA.

Here are a few highlights of the Roth IRA:
  • Eligibility for self-employed – must have earned income and cannot make more than $132,000 if filing taxes single or $194,000 if married filing jointly
  • Allowable yearly contributions up to $5,500 ($6,500 if over age 50)
  • Withdrawals after the account has been open for at least 5 years and the owner is 59½ are tax-free.
  • There are no required minimum withdrawals
A Roth IRA at a self-directed custodian such as Equity Trust has an added bonus – the ability to invest in a full range of assets beyond just stocks and bonds. With a self-directed Roth IRA, self-employed people can invest in real property, private businesses, mortgages, tax liens, precious metals and much more.

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