One of the smartest money moves a young person can make is to invest in a Roth IRA.—Kiplinger, 2015

ROTH IRA basics

Tips to continue saving for your future

WHAT TYPE OF ACCOUNTS SHOULD YOU REGULARLY FUND?Pure’s recommended order of saving is:

Save in employer sponsored 401(k) to employer match, if applicable

Save $5,500 to a Roth IRA

Go back to 401(k) & contribute to max

Save in non-retirement accounts (taxable)

WHAT’S THE DIFFERENCE IN TAXATION OF THESE ACCOUNTS?

Capital Gains Tax Rate: 0-20%Ordinary Income Tax Rates: 10-37% depending on taxable incomeAs of January, 2018

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A Roth IRA is an individual retirement account that is funded with a�er-tax dollars and all future growth is tax-free. Some say that one of the smartest moves a young person can make is to invest in a Roth IRA.

WHAT IS A ROTH IRA?

2018 ROTH IRA INCOME LIMITS

Single filers

Roth IRA

Married filers

Phase-out starts at $120,000; ineligible at $135,000

Phase-out starts at $189,000; ineligible at $199,000

ELIGIBILITY, AS OF 2018 ROTH IRA VS. TRADITIONAL IRA

Account owner must have employment compensation A�er-tax contributions

(pay the tax before you contribute)Future growth is tax-freeTax-free distributionsNo required minimum distribution

Traditional IRATax-deferred contributions Contribution and future growth is taxed at ordinary income tax rates upon distributionMandatory required minimum distributions start at age 70 1/2

Annual contribution limit: $5,500$1,000 catch-up if age 50 or over

SAVING GOAL: 15% OF YOUR

PAYCHECK EACH YEAR

Tax-freeRoth IRA

Tax Rate on Contribution A�er-tax Pre-tax | 0% A�er-tax

Capital Gains0%Tax Rate on Distribution

Tax-deferredIRAs, 401(k) TaxableContribution Distribution

OrdinaryIncome Tax

WHAT IS A ROTH IRA? The High Cost of Waiting

Mason’s Balance: $241,258Mason's Contributions: $110,000 Chelsea's Balance: $618,950Chelsea’s Contributions: $55,000

�e longer you wait to save for retirement, the more you’ll have to put away each month to reach your goals. It pays to have time on your side.

Here’s an example to illustrate why:

Given the fact that Mason contributed $55,000 more than Chelsea, you might expect Mason would

have a significantly greater total saved for retirement at age 65. Surprisingly, the opposite is true.

Starting at age 25, Chelsea started investing $5,500 per year in a Roth IRA. She continued payments for 10 years until age 35, earning an average of 7% a year on investments. Chelsea’s contributions totaled $55,000.

Mason waited until he was 45 to start saving. At age 45 he began investing $5,500 per year in a Roth IRA. He also averaged a 7% annual return, but continued to make investments for 20 years until he retired at age 65. His contributions totaled $115,000.

CHELSEA STARTED TO SAVE EARLY

WHO SAVED MORE?

MASON STARTED TO SAVE LATE

The DramaticDifference CompoundInterest Can Make

*Contributions can be withdrawn at any time with no tax penalty.

Visit Pure Financial Advisors’ Learning Center at pure�nancial.com/learning-center for �nancial resources or email any questions to info@pure�nancial.com

WHAT CAN THE MONEY BE USED FOR?*

SUPPORT & GUIDANCE

Retirement savings: Distribute money a�er age 59½ with no tax penalty

Purchasing a home: Withdraw up to $10,000 tax-free for a down payment before reaching 59½

Education expenses: Take out money for quali�ed college expenses, but taxes will have to be paid on the earnings

Emergencies: Distributions of earnings will be subject to tax and there will be a 10% early withdrawal fee if distributed before age 59½

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