7 Reasons Not to Make a Roth Contribution

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Roth accounts can be a great way for many clients to save for their retirement. Contributing to a Roth IRA, a Roth 401(k) or a designated Roth account offers the ability to potentially avoid taxes on the money when withdrawn, and Roth accounts are generally exempt from required minimum distributions.

The Setting Every Community Up for Retirement Enhancement (Secure) 2.0 Act has made Roth accounts even more attractive in many respects. A Roth contribution is not the right strategy in all cases, however.

You may have clients whose income fluctuates based on their profession, company bonus levels or other factors. When you meet with your client, be sure to discuss their income expectations for the current year and the next. You can then run the numbers to determine if contributions to Roth or traditional retirement accounts make the most sense for your client in a given year, as well as what will make sense the following year.

The nice thing about Roth versus traditional account contributions is that you and your client can decide on a yearly basis if contributing to a Roth account, a traditional retirement account or both makes the most sense tax-wise for that particular year.

Check out the slideshow for seven reasons your client may not want to make a Roth contribution and what they should consider instead.