The Informed Investor

How To Maximize Your Roth IRA in 2021

June 15, 2021

A Roth IRA is one of the best ways to invest your funds this year. It can allow you to build your nest egg in a safe and steady manner, all the while tax-free throughout your life. Understanding how your Roth IRA works is key to making the most of your time and money. Below are several strategies you can use to maximize your Roth IRA in 2021.

Start at the Beginning of the Year

While it is common practice to contribute to IRAs when filing your taxes, this is not the best time to do so. Contributing throughout the year not only provides the maximum amount of time for your account to flourish but also lets you set up a consistent, manageable contribution plan. A monthly plan eases the stress of maximizing your Roth IRA and takes advantage of dollar-cost averaging, a solid strategy for long-term results.

Contribute Early and Often

One of the biggest benefits of a Roth IRA is the ability to compound your investment tax-free. Making steady contributions to your account, as early in your working years as possible, is one of the best ways to experience a snowball effect that will be of great benefit when you retire. Even smaller contributions can make a difference in the size of your future nest egg.

Take Advantage of Mutual Funds

Diverse and often inexpensive, mutual funds are the perfect partners for your Roth IRA. Making use of mutual funds is a popular and prudent strategy used by investment management professionals for their clients. Mutual funds which can provide important diversification of assets along with the tax sheltering properties of a Roth IRA are a powerful combination that helps the long-term growth of your account.

Research Varied Investment Opportunities

If you want a more specialized asset allocation for your Roth IRA, it is wise to seek the services of an experienced investment management professional. A reputable, fiduciary financial advisor can provide a wide variety of investment choices along with expert guidance and consistent oversight of your account. A personally designed investment strategy created with help from your financial advisor can be a powerful asset.

Select a Beneficiary

Having a beneficiary connected to your Roth IRA helps protect the account from fees and creditors, as well as allowing the account to continue compounding after your death. Certain beneficiaries like a spouse or someone with health conditions gain the ability to make use of the account over their lifetime, as opposed to the standard 10-year distribution. Spouses can also create new IRA accounts, further increasing the longevity of your investment. Consult with our financial advisors to learn strategies to gain the greatest benefits for your beneficiaries, including splitting the Roth IRA among multiple heirs and limiting potential tax consequences that may occur.

Learn More About Roth IRA Accounts

If you would like to learn more about Roth IRA plans or wish to explore how to increase the potential of your own account, ICC is the resource you need. ICC provides clear and unbiased investment guidance for its clients, backed by a team of experienced fiduciary, financial experts. If you have $1,000,000 or more in investable assets, contact us today at 702-871-8510 to learn how our team can help you.