Roth IRA Overview

Disadvantages

While the Roth IRA is a great retirement savings account, one of the major disadvantages is there are income restrictions regarding who is eligible to participate in this type of retirement account. It also depends on how an individual files their taxes (i.e., single, married filing jointly, or married filing separately). Another disadvantage is the cap on yearly contributions (previously discussed). Thus, even for those who can put more money away, they cannot exceed 5,500 dollars. Anything beyond this amount must be placed in a different account without the shelter from taxes.

The final disadvantage has to do with a lack of tax deductions. Typically, contributions to a retirement savings account qualify individuals for a tax deduction when filing their taxes. However, because taxes are withdrawn at the time someone contributes to their Roth IRA, they are unable to file a tax deduction.