Roth IRAs:  Retirement & Legacy Planning Strategies

Roth IRAs are a great tool for retirement and passing on wealth because they offer tax advantages and flexibility. By including them in your financial plan, you can grow your money tax-free, diversify your income in retirement, plan your estate better, and easily access funds when needed. While some people can't contribute due to income limits, there are ways to get access to these benefits. Please reach out to Evergreen and a tax expert to figure out what works best for you.

Roth Basics

  • Contributions are made after-tax, grow tax-deferred, and qualified withdrawals are tax-free. Qualified withdrawals are defined as:
    • Taken after the age of 59 ½
    • After the account has been opened for at least five years.
  • No Age Limit- you can contribute to these accounts as long as you meet the income requirements (see income limits below).
  • No Required Minimum Distributions (RMDs) - unlike traditional IRAs and other tax-deferred retirement accounts, you do not need to start RMD's at age 73 or 75, and the accounts can continue to grow tax-free during your lifetime.
  • Diversification of Retirement Income - Because qualified distributions from Roth IRAs are tax-free, they provide a source of income that is not subject to the uncertainties of future tax rates. This can be particularly advantageous for those who may face higher tax burdens in retirement due to significant investment portfolios or other sources of income.
  • Beneficiary Taxation- Although beneficiaries must withdraw RMDs from inherited Roth IRAs within a decade, these distributions aren't taxed, providing a chance to transfer assets to the next generation tax-free.

Types of Roth Accounts

Roth IRA

These accounts are the most straightforward to open and contribute to; as long as you are under the income limits, you can open at virtually any custodian and contribute. The annual contribution amounts are relatively low, $7,000 for those under age 50 and $8,000 over age 50 in 2024. A great option for young individuals or those in a low-income tax year to set up for tax-free growth.

Self-Employed Persons (SEP) Roth IRA

Tax-deferred SEP IRAs have been available for decades, but the Roth feature was created by the SECURE Act 2.0 in 2022. These accounts are best for those who are self-employed and/or own a small business. Those eligible can contribute 25% of compensation up to income limits.

These accounts must be available to eligible employees, defined as anyone who is:

  • Over age 21
  • Has worked for the company at least 3 out of 5 years
  • Received compensation of at least $750 in 2022, $650 in 2021 of 2020, and $600 between 2016 - 2020[1]

Roth 401(k)

Many 401(k) plans offer the opportunity to make Roth contributions, so confirm this with your HR. Plans may allow the ability to designate a portion of the contribution as tax-deferred and a portion to Roth accounts up to the annual contribution limits of $23,000 for those under age 50 in 2024 ($30,500 over age 50), allowing you the ability to receive some tax-deferral. [2]

Backdoor Roth IRA

These can be appropriate options for individuals who exceed Roth IRA income limits and want to make Roth contributions on top of tax-deferred contributions to their employer retirement plan. Taxpayers contribute money to a non-deductible IRA and then move to a Roth IRA. It is important to work with a tax professional on this strategy, as all or part of a conversion could be a taxable event and could push you into a higher tax bracket.

Mega Backdoor Roth

Some employers, such as Amazon, Microsoft, and Meta, offer a feature to add after-tax 401(k) contributions on top of the maximum tax-deferred contributions. Check with your HR to see if your plan allows this and the mechanics of the process. This is well suited for those with surplus cash flow looking to maximize retirement savings.

Roth Conversions

Conversions are helpful tools for those who have sizable tax-deferred retirement accounts and want to reduce RMDs once they turn 73 or 75. The process works by taking funds from a tax-deferred retirement account and converting them a Roth IRA, paying taxes on the amount converted. Individuals are eligible to convert as much as they are willing to pay taxes on. This strategy often makes sense for those in lower income years, such as at retirement or during a career change, and has cash available to pay taxes. It is important to work with a CPA or tax advisor on this strategy to understand how much you can contribute before pushing you into a higher tax bracket.



Katie Vercio, CFP®

Director of Financial Planning

DISCLOSURE: Securities highlighted or discussed in this communication are mentioned for illustrative purposes only and are not a recommendation for these securities. Evergreen actively manages client portfolios and securities discussed in this communication may or may not be held in such portfolios at any given time. This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Any opinions, recommendations, and assumptions included in this presentation are based upon current market conditions, reflect our judgment as of the date of this presentation, and are subject to change. Past performance is no guarantee of future results. All investments involve risk including the loss of principal. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed and Evergreen makes no representation as to its accuracy or completeness.

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