As the U.S. retirement system faces challenges, including a long-term funding problem with Social Security, individual retirement accounts (IRAs) have become increasingly important for building retirement savings. One valuable option is the Roth IRA, which allows contributions to be withdrawn without paying taxes or fees, provided certain conditions are met.
Understanding Roth IRAs
Roth IRAs offer a unique advantage: contributions can be withdrawn tax-free and penalty-free if the account has been open for at least five years and the account owner is at least 59½ years old. The earnings on the investment can also be reinvested without tax drag, making Roth IRAs an attractive option for long-term savings.
For 2026, the contribution limit for Roth IRAs is $7,500, with an additional $1,100 catch-up contribution available for those 50 and older. However, eligibility is restricted at higher income levels, with contributions phasing out between $153,000 and $168,000 for single filers and $242,000 and $252,000 for joint filers.
Seven Best Funds to Hold in a Roth IRA
Given the tax advantages and limited annual contribution room, selecting the right funds for a Roth IRA is crucial. Here are seven funds that can make the best use of scarce Roth IRA space while matching an investor’s time horizon, risk tolerance, and overall asset allocation.
- Vanguard Dividend Growth Fund (VDIGX)
- Vanguard Wellington Fund Investor Shares (VWELX)
- Fidelity Contrafund (FCNTX)
- JPMorgan Equity Premium Income ETF (JEPI)
- JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
- Schwab U.S. REIT ETF (SCHH)
These funds offer a range of investment strategies, from dividend growth and balanced allocation to equity premium income and real estate investment trusts (REITs). By understanding the characteristics of each fund, investors can make informed decisions about which ones to include in their Roth IRA portfolios.
Original reporting: Alexandria, VA News – WTOP News — read the source article.
