How to Build a Roth IRA at Age 50

You might, through oversight or due to pressing need, have neglected your retirement savings plan until your middle years. You might also come to open a Roth IRA at age 50 because your income, which previously exceeded the Roth limits, has dropped. As pundits advise, it's never too late to start a savings program. The Internal Revenue Service, aware of the human tendency toward procrastination, devised the catch-up contribution. IRA owners 50 and over can contribute more money each year than younger workers. Building a Roth at 50 takes planning and discipline.

Contribute the maximum each year. As of publication, that is $6,000, $1,000 more than those under 50 can contribute. The catch-up contribution is intended to give older IRA savers a principal boost to help compensate for the loss of compounding time.

Choose growth investments. If you expect to need the Roth funds before you die, you don't want to assume a great deal of risk. You do, however, want the money to grow as much as possible. Buying stocks or funds of stable companies that offer healthy returns may be more prudent than emerging-market or foreign currency holdings. Even low returns can be withdrawn tax-free at age 59 1/2, so buying some bonds and government securities is still a good idea.

Withdraw no principal. When you take out Roth principal, you can't replace it later in the year. Your total contribution for the year can be no more than $6,000. Removing principal just means losing out on earnings. Since you have so much time to make up for, you can't afford the loss.

Keep contributing for as long as you live. You don't ever have to take distributions if you don't want to. If, in the end, you find you do not need the Roth funds, you can leave them to your spouse or heirs, who can benefit from the tax-free funds.