After what was arguably the most contentious presidential election in memory, there are many who have been left feeling uncertain about the future. It is impossible to know at this early moment just how the results are going to affect our country. If all those thoughts have you contemplating the future more than usual, though, maybe it is a good time to think about the future of your finances. And when it comes to one’s financial future, it pays to take a closer look at Roth IRAs.

We all heard about Individual Retirement Accounts (IRA) but not all of their nuances are well understood.

These accounts (for individuals who are not business owners) come in two forms, a Roth IRA and a traditional IRA. The main difference between these two is when the money is taxed. In a traditional IRA, the contributions you make could potentially be tax-deductible, but you will definitely pay taxes on that money when it is withdrawn. On the other hand, contributions made to a Roth IRA are not tax-deductible, but if you withdraw the money after age 59 ½ , you will not have to pay any taxes then.

Which IRA is better for your financial situation then largely depends upon when it will be more advantageous for you to pay taxes on that money. It is essentially a question of whether you expect to be in a higher tax bracket now or later in life. For the purposes of this article, though, we will be concentrating on the Roth IRA.

Roth IRAs do have income restrictions. Single filers must have modified adjusted gross incomes of less than $132,000 in 2016 and married couples filing jointly must have a modified AGI of less than $194,000 in order to be able to contribute at all. How much you are allowed to contribute can also phase out with how much you earn, so look at this article if you would like to delve a little further into those numbers.

There is also a restriction on how much money you are allowed to put into the Roth IRA. The contribution limit is $5,500 per year before age 50 and $6,500 if 50 or older.

Although there are those contribution limits, there is no limit on the amount of your existing balance you can roll over from a traditional IRA to a Roth IRA if you choose to do so. This could be a good strategy if a Roth plan looks like your best long-term solution, but you currently earn too much money to make contributions. Just like all regular contributions to a Roth IRA, you will have to pay taxes on the money being moved into it, and there could be situations where the amount being converted pushes you into a new tax bracket with negative consequences. If you are not in that situation, though, paying the taxes on the money now could lead to years of continued tax-free growth.

A potential advantage of a Roth IRA is that you are not required to make any withdrawals during your lifetime. So if you have enough other sources of money to continue to live comfortably, that IRA becomes a great wealth-transfer vehicle as it can continue to grow tax free and beneficiaries won’t owe income tax on withdrawals, either.

These plans are most often thought of as ways to prepare for retirement, and they are wonderful ways to do that. There are other benefits, however, that are sometimes overlooked. For instance, Roth contributions (but not earnings) can be withdrawn without penalties or taxes at any time, even before age 59 ½. Beyond that, once you reach five years since the first contribution was made, up to $10,000 can be withdrawn from the Roth to pay for qualified first-time homebuyer expenses.

A Roth IRA is just one of many ways to help ensure your financial future and one that can be used in many advantageous ways. Hopefully this article helped lay out some of the basics of what it is. If you have further questions about its rules or tax implications, however, please do not hesitate to contact us and we will be happy to help.