Why Starting a Roth IRA Late Can Still Pay Off

Regardless of how old you are, you can still reap the benefits of a Roth IRA, a retirement account that allows savers to grow their money tax-free.

While opening a Roth IRA earlier in life is typically more beneficial than opening one later in life, there are still financial benefits and tax advantages of opening a Roth IRA when you’re older.

Understanding Roth IRAs

With a Roth IRA, savers pay taxes on their upfront contributions, investments grow tax-free over time, and distributions are tax-free in retirement.

A traditional IRA works differently from a Roth IRA by providing tax savings on the front end.

“In contrast, a traditional IRA allows you to set aside dollars on a pretax basis, saving you money now. However, distributions are subject to income taxes on the back end,” said Kyle Harper, a financial advisor at Harper Financial Planning.

Getting tax-free distributions in retirement is a key advantage of a Roth IRA, but you need to follow certain rules to qualify.

“In order for a distribution to be considered a ‘qualified distribution,’ a Roth IRA owner must be 59½ years old and have had a Roth IRA for five years,” Harper says.

Another advantage of a Roth IRA is that there are no required minimum distribution (RMD)s, so you can leave money in the account for as long as you want (while you’re alive).

“Roth IRAs are not subject to the same RMD rules as traditional IRAs. This allows investors to take their money out when they would like in retirement instead of being forced to do so,” said Harper. “An additional benefit is that it is not reported on the tax return, and thus doesn’t have the ability to increase your Medicare Part B premiums, either.”

Why Starting a Roth IRA Late Can Be Advantageous

The Roth IRA contribution limit for 2025 is $7,000, or $8,000 for people 50 and older. This catch-up contribution of $1,000 is another reason why the Roth IRA can be a great option for older savers.

Contributing the maximum amount to a Roth IRA while in your 50s has the potential to significantly boost your retirement savings.

“Even for someone who is 50 years old, there is a sizable benefit,” said Harper. “They can put in $8,000 annually, which is $1,000 more than those under 50. If they do so for 10 years, they will have contributed $80k, or $160k if both spouses are contributing. Typically, Roth IRAs are one of the last accounts investors tap in retirement. Let’s assume the individual retires at 60 and doesn’t start pulling from their Roth IRA until 70. That account could be worth $150k or more.”

A Roth IRA comes with income requirements. These requirements depend on your modified adjusted gross income (MAGI). In 2025, to make the full contribution amount to a Roth IRA, you must have income less than $150,000 for singles or less than $236,000 for joint married filers.

A Roth IRA can also be a good way to diversify your retirement savings.

“If you’ve contributed primarily to pretax accounts throughout your career, adding Roth contributions later on, even during peak earning years, could be a worthwhile way to build tax diversification and create more flexibility in retirement,” says John Abernethy, a certified financial planner (CFP) with Together Planning.

If you are 50 or older, you may wish to consider choosing safer investments for your Roth IRA.

“Another strategy is to carve out part of the Roth IRA into some type of safe, alternative investment—perhaps an annuity,” says Marcus Sturdivant, managing member at The ABC Squared.

Disadvantages of Starting a Roth IRA Late

A disadvantage of opening a Roth IRA in your 50s or later is that you won’t have as much time for your investment to grow due to compound interest. People who start a Roth in their 20s or 30s have many more decades of compounding interest ahead of them. Start in your 50s and you’ll have a much shorter horizon for financial growth.

Another disadvantage is that with a Roth IRA, the maximum you can invest each year is $8,000 if you are 50 and older. If you have more money than that to invest, you’ll have to choose another type of account.

The Bottom Line

Investing in a Roth IRA can be a great strategy if you are 50 and up and meet the income requirements. You’ll enjoy tax-free distributions from a Roth IRA as long as you are 59½ or older and have had a Roth IRA for five years. For those 50 and older in 2025, you can invest as much as $8,000 into a Roth IRA, and this includes a $1,000 catch-up contribution.

Your 50s are a good time to boost your retirement savings, and investing in a Roth IRA is a smart place to put your money.