If you meet the income requirements, you can contribute money to a Roth IRA. If you stop contributing to your Roth IRA when the market is down, you may miss out on more tax-free income in retirement. The sooner you start a Roth IRA, the better. There is no age limit for contributing funds, but there is an age limit for starting withdrawals.
You must be 59 and a half years old to start withdrawing income from contributions, or you must pay taxes and fines. In addition, to avoid taxes, the funds must be in the account for five years. By contrast, Roth IRA contributions are made with after-tax money and you won't have annual RMDs. You can withdraw contributions to a Roth account at any time, without paying taxes or penalties.
However, you can only withdraw your earnings tax-free after age 59 and a half, as long as you've had the account for at least five years or meet other conditions.1 otherwise, you'll have to pay taxes and penalties for them. If you don't name a beneficiary, your spouse (if he is your primary beneficiary) can choose to inherit your Roth IRA or transfer it to a Roth IRA in your name. You can also add to a Roth IRA by transferring amounts from traditional IRAs or other qualified retirement accounts, such as a 401 (k) or 403 (b) plan. If you don't qualify for a Roth IRA due to income limits, some investors choose to make contributions to a traditional IRA and then convert them to a Roth IRA.
The distribution rules of a Roth IRA can also help you if you intend to leave your IRA to your heirs. If you change jobs, you have the option of converting a traditional 401 (k) directly into a Roth IRA without having to convert it into a traditional IRA first. Even people with high incomes who can't directly fund a Roth IRA can use this strategy, also known as a clandestine Roth IRA. Therefore, making non-deductible contributions to a traditional IRA with the goal of later converting them to a Roth IRA probably works best if you have little or no existing deductible IRA balance, which muddies things.