When you’re in your 20s and 30s, retirement is likely to be one of your lowest priorities. You are likely to be far more interested in buying a vehicle, saving for a home or building an emergency fund. However, financial experts strongly recommend that this is precisely the time to start putting money away for your retirement, even if it is only a small percentage of your monthly paycheck.
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Fortunately, there are some financial products to lessen the blow of saving for retirement with tax-advantaged accounts like an IRA. There are four types of IRA or Individual Retirement Account.
1. Traditional IRAs offer tax-deductible contributions, but when you withdraw the funds after you retire, they will be taxed at the ordinary income rate for that year.
2. SEP IRAs are designed for self-employed individuals and adhere to the same tax rules as traditional IRAs.
3. Simple IRAs are also intended for the self-employed and small businesses with the same withdrawal rules as traditional IRAs.
4. Roth IRA is the fourth type of IRA and is the focus of this article.
So, here we’ll explore the Roth IRA on Webull in greater detail.
The Webull Roth IRA Basics
Webull is a commission-free ETF and stock trading platform that has been operating since 2017. It quickly established a solid reputation for its extensive line of offerings which range from technical indicators to simulated trading and advice with input from expert analysts. Webull also has over 20 technical indicators, assisting traders to identify micro trends. (check out our review of Webull here)
Due to its impressive wealth of resources, this platform holds appeal for more seasoned traders considering their long-term investment goals.
Webull offers two types of IRAs: Traditional IRA and Roth IRA. The key difference between these products is that contributions to a Roth IRA are not tax deductible in the year that you make them. However, the distributions are tax-free. Essentially, this means that you are contributing to your Roth IRA using after-tax dollars, but you’ll pay no taxes even on any investment gains. Roth IRAs also don’t have RMDs or required minimum distributions. So, if you don’t need the funds, you don’t have to withdraw them from your account.
On the Webull platform, both the Traditional and Roth IRAs can be inherited to create an Inherited IRA, but you can also rollover a qualified retirement plan (QPR) such as a 401k created with a former employer.
With a Webull self-directed IRA, you’ll have access to the same securities available with standard taxable accounts. This means that you can trade in stocks, ETFs, options, and Penny stocks. However, you can’t trade cryptocurrencies in a Webull IRA account.
Webull retirement accounts also have access to the same suite of digital trading tools. This includes the basic website, a solid browser platform, a well-regarded app for iOS and Android devices and an advanced desktop program. The features on these resources include full-screen charting with a variety of graphing tools, multiple trade tickets, IPO center, equity screener, fractional share trading and social networking.
Pros and Cons
As with any financial product or platform, there are both advantages and potential downsides to the Webull Roth IRA. These include:
Free to Set Up: Webull allows you to set up a new Roth IRA free of charge. This is quite unusual as many platforms impose a fee for this service.
Well-Regarded App: The Webull platform including its app is well organized, creating a great user experience. Even if you’re new to investing, you should find the app easy to navigate when you’re setting up or managing your Roth IRA.
Flexible: You can choose any of the ETFs and stocks on the Webull catalog for your IRA.
Limited Investment Options: Webull only trades in U.S. listed ETFs and stocks, which does limit the investment options for your retirement investing.
Limited Vehicles: Competing platforms also offer bonds, CDs, options and mutual funds, which are not available with Webull IRAs.
No Prebuilt Investment Portfolios: If you’re new to investing, you may find the lack of prebuilt portfolios a little daunting.
Contributions and Income Limits
As with the other types of IRAs, there are some contribution and income limits associated with Roth IRAs. If you’re in a lower income tax bracket or you’re younger, a Roth IRA may be advantageous for you, since you can pay tax on your contributions, but you won’t pay income tax on your withdrawals. Those in a higher tax bracket may find that the tax exemption and contribution limits are too restrictive and a Traditional IRA could be a better choice.
To contribute to your Webull IRA, you must have earned income. The qualified earned income for your Roth IRA would include salaries, wages, or tips paid in addition to self-employment income. It is important to note that the limits for Roth IRAs typically change every few years. For 2023, the maximum contribution limit is $6,500 or $7,000 if you’re aged 50 or older.
However, there are also limitations based on income which determine who can contribute to Roth IRAs. The income phase out in 2023 for Roth IRAs starts at $138,000 if you file singly or $218,000 when you’re married and filing jointly. It is important to note that if you make $153,000 or more, or $228,000 for married joint-filing, you will not be eligible to make contributions to a Roth IRA.
How to Open a Webull Roth IRA
Webull makes it quite simple to open an IRA. You can start the process by clicking on the blue button on the account application page. This will allow you to sign up and get a new login. You will need to provide a mobile phone number to do this. If you’re an existing Webull customer, you can skip this step and simply log into your account.
Once you have a login, you will need to complete the longer application to open your new IRA. The link can be found on the “My Account” page, where there is an orange button or a link on the drop-down menu bar.
Bear in mind that only those who are currently living and legally working in the US can open a Webull IRA. Non-US citizens who meet the earned income requirements can open an IRA.
When can you withdraw from your IRA?
The optimum time to withdraw from your IRA is after you turn 60 or later. Although there are some exceptions such as using the funds for medical expenses, first-time home purchases and disabilities. If you withdraw before you turn 59 1/2, you will not only pay applicable taxes on your withdrawal but also an early withdrawal penalty.
Bear in mind that generally, the longer that you can wait before you take distributions from your retirement account, the more time your fund will have to grow.
Is a 401k different from an IRA?
Both IRAs and 401k plans provide tax advantages for those investing in their retirement. The key difference is that 401ks are only available through your employer. The contributions are deducted automatically from your paycheck and some companies will match part of your contributions. Additionally, 401ks have higher contribution limits.
IRAs can be set up by anyone with earned income. Another difference is that most 401ks have a limited choice of investment options, while IRAs typically offer a wider variety of stocks, funds and securities.
What are the advantages of IRAs?
IRAs are designed to offer tax-advantaged ways to save for your retirement. A Roth IRA can allow you to reduce your tax bill when you make withdrawals in retirement, with tax-free investment gains. This means that while you don’t reduce your immediate income tax, a Roth IRA allows you to eliminate taxes from your retirement funds.
What are the fees for a Roth IRA on Webull?
The Webull regular pricing schedule applies to all its IRAs. This means that you’ll not incur any fees to open, close or maintain your IRA on the platform.
Starting saving for retirement is crucial for your long-term financial future. Whether you’re in your 20s and just starting out in your career or approaching your 40s, it is important that you start as soon as you can.
A Webull Roth IRA could be a good option if you are not currently in a high-income tax bracket and want to have control over the investments used in your retirement investment fund. The Webull platform is easy to use and there are little or no fees for your trades. You also get FREE STOCK when you sign-up (click here for free stock from Webull)
There is also an impressive array of features and tools across the entire platform. From charting and technical indicators to learning resources, there is plenty for everyone. So, whether you’re a complete investing newbie or a more experienced trader, Webull has a lot to offer investors with different experience levels who are considering retirement funds. So, if you’re thinking about starting a Roth IRA, Webull is certainly worthy of consideration.