The Roth IRA, the ‘Swiss Army knife of finance,’ can be a versatile tool in your financial toolbelt

A friend of ours likes to say, “With the right tools, you can build anything.”

But not every project starts inside a fully stocked workshop. If you had to start somewhere, which tool is versatile enough to add to almost any toolbelt?

We at Leibman may work in financial services, but the metaphor applies! Let us introduce you to the “Swiss Army knife of finance”: the Roth IRA.

Why do we love this tool? Like many other retirement vehicles, Roth accounts can generally be built by anyone with earned income (though not too much: there’s an upper limit). But here’s what sets a Roth apart from other retirement accounts:

• Roth earnings grow tax-free. You pay your ordinary income tax rate on Roth contributions at the time they’re made. You will never pay tax on the earnings growth inside a Roth. Why does this matter?

— When used as designed, once your working years are over, you can make Roth withdrawals to supplement your retirement income with zero tax obligation.

— If your tax rate may go up in the future — by law or because your highest-earning years are still ahead of you — you can take advantage of your current tax rate by contributing to a Roth now. Existing IRAs may also be converted to Roth, as a so-called “backdoor Roth.” Both methods could help ease a future tax burden by making use of your current rate.

• Roth uses are flexible. Think beyond retirement: Your household could use a Roth in the mix when planning ahead for a variety of purposes.

— Withdrawals can be made at any time for certain qualified expenses — money for a first-time home purchase or a birth or adoption, just to name a few.

• Roth contributions may be withdrawn after five years, for any reason — no tax, no penalty, and your age doesn’t matter. The Roth deposits you’ve made can be taken out tax- and penalty-free once this so-called “5-year rule” is met.

— One use case: A Roth could be established while the kiddos are in middle school, and contributions could be withdrawn when it’s time to help pay for college, an apprenticeship or any other adventure after high school graduation.

• Roths can be handy for lump sums. Spending money in retirement can feel hard for some folks, even when they have saved more than enough to enjoy the things they worked for! If you’re dreaming of a second home, boat or camper, the tax-free withdrawals from a Roth might help avoid a higher tax bracket for these “lumpy” one-time purchases.

• Roth accounts do not have RMDs. Unlike traditional IRAs, Roth accounts do not have “required minimum distributions” (RMDs). This feature brings some flexibility to your retirement planning: Your Roth account has a chance to continue to grow for as long as you choose. No IRS-mandated withdrawals, at any age.

A little more on the nuts and bolts of building a Roth: For those eligible in 2026, up to $7,500 can be contributed to a Roth any time before the next year’s April tax deadline, and those 50+ can contribute an additional $1,100 as a “catch-up.” Existing traditional retirement accounts may be eligible for Roth conversions for anyone willing to pay tax on the converted amount. These conversions happen on a calendar-year deadline.

Could a Roth work for you? A Roth may not be right for everyone, and even the best Swiss Army knife is still only one tool in the toolbelt. But the team at Leibman Financial Services would be happy to chat. The talk is free, any time.

Happy crafting! Hope you get to build something beautiful.