Roth IRA Tax-free compounding
Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by U.S. News & World Report in an article — by Tony Dong, “7 Best Funds to Hold in a Roth IRA” — regarding using Roth IRAs to build your wealth by making after-tax contributions in exchange for tax-free investment compounding and tax-free withdrawals.
Do you have a “set it and forget it” mindset for your IRA?
For those who don’t monitor or trade their Roth IRAs frequently or have a “set it and forget it” mindset, consider investing an IRA or Roth IRA in long-term, low-fee, target date funds. They are asset allocation vehicles where the mix of securities and asset classes — equities and fixed income for example — gradually shifts as your target date for withdrawing or needing the money approaches.
Additionally, consider looking out even further on your personal time-horizon than just your retirement age—or whatever age advisors or articles may have recommended a couple decades ago—since once you reach 65, your life expectancy could easily be another twenty to thirty years.
Even though target date funds are convenient long-term vehicles, as needs and priorities change in life, it is worthwhile to occasionally revisit your Roth IRA allocation or reach out to a financial advisor or fiduciary for appropriate advice.
On the more complex side, for high-net-worth families, where possible, we may want to place solid but tax-inefficient funds, like hedge funds or private credit funds, into their IRAs and Roth IRAs and then balance out the remainder of their allocation across taxable accounts. With proper financial planning, this helps optimize the tax efficiencies of their Roth within a holistic framework.
Quoted article excerpt is below:
Michael Ashley Schulman, partner and chief investment officer at Running Point Capital, likes target-date funds, noting that they offer the convenience of putting your portfolio rebalancing on autopilot. “The asset allocation of these funds will gradually shift to become more conservative as your target date for retirement or withdrawing the money approaches,” he says.
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23-08
