Roth IRA

Pay taxes now, enjoy tax-free withdrawals later

A Roth Individual Retirement Account (IRA) helps you build your retirement savings by:

  • Investing your money tax-deferred. Your money goes into a Roth IRA account after it’s taxed (based on your income at the time of contribution). That means any growth won’t be taxed.
  • Allowing tax-free withdrawals. Because you contribute using after-tax money, you don’t pay any taxes when you withdraw money from your account.1 And unlike a 401(k) or traditional IRA, you’re not required to withdraw a minimum amount of money at any specific age.

Features of a Roth IRA

In addition to tax-free withdrawals, a Roth IRA lets you:

  • Contribute as long as you're working. Unlike a traditional IRA, you can continue making contributions after age 70½ if you’re still earning income.
  • Leave a legacy. You can pass your Roth IRA assets to your heirs, free of federal income tax.

Could a Roth IRA be right for you?

A Roth IRA can be an excellent savings vehicle for many people, but it depends on your needs and situation, including:

  • Your current income level (your income must fall below a certain threshold to be eligible for a Roth IRA)
  • Your tax bracket now compared to what it might be in retirement (since you pay taxes on Roth contributions at the time you make them)
  • When you think you’ll want to start pulling money from your IRA (Roth IRAs have different saving and withdrawal timeframes than traditional IRAs)
Use this quiz (PDF) to help you determine if a Roth IRA might be a good choice for you, and as a starting point to discuss with your financial professional.
Image showing information in a PDF that can help someone determine if a Roth IRA is right for them.

Compare a Roth IRA and a traditional IRA

traditional IRA is another type of IRA you can choose. Compare a Roth IRA and traditional IRA side by side.

 Traditional IRARoth IRA
When do you pay taxes?In retirement, when you withdraw your savings.Up front, before you contribute. Your earnings then grow tax free.
Are there age limits?You can contribute up until the year you turn 70½.Can contribute at any age, as long as you have earned income.2
How much can you contribute?Up to $6,000; if you’re 50 or older, you can contribute an additional $1,000Up to $6,000; if you’re 50 or older, you can contribute an additional $1,000
Are there income limits?You must have earned income, but there’s no maximum limit3To contribute the full amount allowed by the IRS, your income must be below:
  • $122,0004 for a single tax filer
  • $193,0004 for a joint tax filer
Are there rules around withdrawing your money?
  • You can withdraw money penalty-free at age 59½, or earlier for certain hardship situations
  • You have to start withdrawing money by April 1 of the year after you turn 70½.
  • You can withdraw your contributions at any time, penalty free
  • You can withdraw earnings penalty-free at age 59½, or earlier for certain hardship situations1
  • You’re not required to withdraw your money at any age
When might it make sense to invest in this account?
  • You want to save outside of an employer plan account
  • You expect you’ll be in a lower tax bracket in retirement
  • You want to save outside of an employer plan account
  • You think tax rates may be higher when you retire
  • Your income doesn’t exceed the max limit

Learn more about an IRA with Principal

Find out how Principal® can help you stay on track to reach your retirement goals. Learn more about our IRA options.

Or, open your IRA with Principal today:

Just choose the option that fits your investing style.

  • A Principal IRA keeps you in the driver’s seat. It gives you the control—with as much or as little assistance as you want to help you make informed investment decisions.
  • Principal® SimpleInvest IRA uses technology to create an investment mix personalized to you, that’s monitored and rebalanced on an ongoing basis.
  • Let us connect you with an advisor in your area to discuss a rollover IRA.

Want more information? Read our article on 3 steps for starting an IRA.

Start your IRA with Principal
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1 Your account must be open for 5 years and you must be over age 59 ½ to be eligible for qualified tax-free withdrawals.

2 Subject to IRS income limitations.

3 There may be some limits on tax deductibility if your spouse has a retirement plan at work.

4 Based on 2019 tax year.

This document is intended to be educational in nature and is not intended to be taken as a recommendation. 

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Financial professionals are sales representatives for the members of Principal Financial Group®. They do not represent, offer, or compare products and services of other financial services organizations. 

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC. Principal Life and Principal Securities are members of Principal Financial Group®, Des Moines, IA 50392.

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