The Roth IRA has become an increasingly popular retirement savings vehicle. From 2010 to 2013, Roth IRA balances grew more than 51 percent, while traditional IRA balances grew 28 percent over that same period. In 2013 more than $6 billion was contributed to Roth accounts, while only $4.61 billion was contributed to traditional IRAs.1
The Roth’s popularity stems from its unique tax treatment. You contribute after-tax dollars to your Roth, and the funds grow on a tax-deferred basis. As long as you wait until age 59½ and at least five years after the account was opened to take distributions, all withdrawals are tax-free. That means you can use a Roth to create a tax-free income stream in retirement.
Unfortunately, many people are unable to take advantage of the Roth’s tax benefits. Perhaps your income exceeds the Roth’s limitations and you’re unable to contribute. Or maybe you’ve primarily used a 401(k) or traditional IRA to accumulate retirement assets.
There may be no resource more valuable in retirement than income that’s guaranteed for life. Guaranteed income provides you with a base level of certainty and predictability. It’s not impacted by market fluctuations, and there’s no risk that you’ll outlive your funds. When you have guaranteed income, you can make financial and spending decisions with confidence.
Unfortunately, guaranteed* income is becoming more and more rare for many retirees. There was a time when workers could expect to have their entire retirement funded by Social Security and employer pensions. Today’s Social Security benefits are unlikely to fund a full retirement, however, and few employers still offer a pension.