I highly encourage all of my clients to set up an IRA; whether as a primary means of retirement savings or to supplement a voluntary contribution plan (401k or 403b). Many ask if they should set up a traditional IRA or a Roth IRA. There are advantages and disadvantages to setting up a Roth IRA.
Withdrawals from your Roth IRA are tax free as long as the plan has been open at least 5 years and you are older than 59 ½. However, Roth IRA contributions are not tax deductible on your current tax return. Contributions do not reduce your adjusted gross income (AGI). You give up current tax savings for future tax savings.
There are no age-based required distributions for Roth IRAs so you can continue to grow the account tax free and pass it on your heirs income tax free. Another benefit of a Roth is the ability to make contributions after you turn 70 ½. Traditional IRAs force you to take required minimum distributions starting at 70 ½ and you are not able to contribute to the plan after 70 ½.
Unlike traditional IRAs, a Roth IRA is subject to contribution limits. You cannot contribute to a Roth if your income is above a certain limit. If you are below the income cap then a Roth serves as a great supplement to your other retirement plans.
It is important to discuss with your financial advisor to see what is right for you. Whether you have a Roth or a Traditional IRA, the important thing is that you are saving for retirement!