Your Roth Won’t Be Tax-Free If You Break These Rules
6/13/202618 min
Tax rates are as low as they've been in decades. Yet due to ballooning government deficits and increasingly underfunded entitlements, it's reasonable to have a hedge against higher tax rates in the future. One way to protect your retirement from higher taxes is to have at least some money in Roth accounts. With the Roth, contributions aren't tax-deductible, but withdrawals are tax-free… but only if you follow the rules, which can be complicated. Robert Brokamp explains what you need to heed.Also in this episode:-The Social Security time bomb ticks louder with the recent release of the latest trustees report-Americans are keeping their cars longer than ever, which is saving them money -- and changing the automotive industry-The earnings of companies in the S&P 500 are soaring, but some of that impressive growth is not actually due to business operations-Healthier people tend to be wealthier, and a recent study finds that riding a bike can provide all kinds of physical and psychological benefitsHost: Robert Brokamp, CFP®, EAEngineer: Bart Shannon Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript preview
First 90 secondsRobert Brokamp· Host0:00
[upbeat music] Rules that make your Roth tax-free and the Social Security time bomb ticks louder. You're listening to the Saturday Personal Finance Edition of The Motley Fool Hidden Gems Investing podcast. [upbeat music] I'm Robert Brokamp, and for this week's main segment, I outline the sometimes complex rules you must follow to ensure the distributions from your Roth accounts are tax-free. But first up, let's turn to some news from this past week, starting with the release of the latest Social Security trustees report on Tuesday. And well, folks, the news isn't good. The Social Security Retirement Trust Fund is now projected to run dry in late twenty thirty-two, one quarter earlier than last year's estimate and a full year ahead of where projections stood just a couple of years ago. The primary culprits behind the accelerated timeline are lower birth rates, reduced immigration, and the revenue impact of the One Big Beautiful Bill passed last summer, which reduced how much Social Security benefits are taxed. When recipients pay taxes on benefits, that money goes back into the trust fund. But now fewer beneficiaries are actually paying taxes on benefits, which is good for them, but not for the program's financial health. When the trust fund is depleted, the program will only be able to pay about seventy-eight percent of scheduled retirement benefits from incoming payroll tax revenue, so the program isn't bankrupt, as some people might suggest, but that is still a significant reduction in benefits. Meanwhile, Medicare's Hospital Insurance Trust Fund is also now projected to be depleted a quarter earlier in twenty thirty-three. So stress test your retirement plan and make sure it'll still be