Should Everyone Have a Roth IRA?
Obviously not. And yet, I could not fault you for thinking so. If personal finance media is to be believed, the Roth IRA is the solution to every financial woe that ails you.
Don’t misunderstand me; I like a Roth IRA as much as the next advisor girl. But any financial advice that starts with “everybody” or “always” must be taken with a very large grain of salt. The beloved Roth IRA is no different.
Who Should Consider a Roth IRA? A Decision Tree.
Do you have an emergency fund? Are creditors at your door? I know, booorrrriiinng. And yet, if you do not have financial security today, this is not the moment to fuss over your retirement future. But if the answer is “yes,” you may proceed…
Do you have access to a workplace retirement plan, such as a 401(k)? This is always the starting point for retirement saving because a 401(k) has a feature that no IRA can match: Automatic withdrawal from your paycheck. Don’t come at me with your tale of how miserable your employer plan’s investment choices are. An automatic deposit to a Roth IRA is a poor substitute for the awesome power of the paycheck deduction.
Have you maxed out your annual contribution to your 401(k)? (For 2026, that would be $24,500 if you are under 50 years old. Gen X gets a higher limit.) If the answer is “yes” and you still want to invest more for the future, then…
Take a breather. Truly, I love your enthusiasm for saving for retirement. But depending on your age, there may be a lot of life to be lived between now and then. Remind yourself that when you contribute to a retirement account, the money is locked away until you are 59 ½. (Yes, yes, there are exceptions. But they come with complexity and sometimes cost.)
Are you really interested in investing for retirement, or are you simply interested in investing for the longer term? This is not necessarily the same thing! You don’t have to tax optimize every decision in your life. Consider if you want to invest for the long run, but with the flexibility to tap into your investment before your golden years.
How much income do you make? This is actually a showstopper for many. For 2026, you cannot contribute to a Roth IRA if your Adjusted Gross Income (AGI) exceeds $168,000 if you file taxes Single, and $252,000 if Married Filing Jointly. Quite often, the household that has climbed this far on our decision tree is a household with a good deal of wealth…and thus over the limit.
(Yes, there is the “backdoor” Roth contribution technique, but that’s a story for another day.)
I have often seen what I call “Orphan Roth Accounts.” These are Roth IRAs with just a few thousand dollars in them, opened when the account holder was making a salary just below the income limit and feeling flush. Then their income went up in the normal course of events, they breached the AGI barrier, and they were never able to contribute again.
If you have come this far, then by all means, have at it. Get that Roth IRA.
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