Roth IRA, municipal bonds and Index Universal Life Policies (IUL) are all tax free retirement plans. I choose  Index Universal Life Policy with living benefits because of the many limitations of Roth IRA. With my age and income fluctuations, I can save more in sickness or health, create a bigger estate when I die and not have many limitations. The only one limitation of an IUL is that you must be healthy or have a manageable health condition.

But it is good to diversify.

Here are the most common and sometimes costly mistakes you must avoid with your Roth IRA:

1) Not Being Eligible. You or your spouse must have earned income to contribute to a Roth IRA, but not everyone qualifies, specifically if you’re a higher income earner. The IRS adjusts income thresholds every year to determine if you qualify for a Roth contribution. It’s important to note that you file Married Filing Separate you generally lose the ability to contribute to a Roth IRA.

2) DIY Roth Conversion. While it’s technically possible to draw out your IRA funds (take possession) and then transfer to a Roth IRA it’s not worth the risk of missing the 60-day deadline which could cause you big taxes and the loss of the Roth. It’s easier and more preferred to convert an IRA/401(k) to a Roth via a custodian to custodian transfer.

3) Excess Contributions. It’s no secret that just contributing the max to your Roth won’t provide you enough money throughout your retirement, but be mindful of the annual contribution limits of $5,500 (ages under 50) and $6,500 (ages 50 & over). If you over contribute you may be assessed an IRS excise penalty.

4) Missing Out. One of the biggest mistakes is not having a Roth at all! Even if you contribute to your company 401(k) you still may qualify to contribute to your Roth IRA. Even if your spouse isn’t working you may be able to contribute to his/her Roth as well, in addition to yours, what’s called a “Spousal Roth IRA Contribution.”

5) Not Maximizing Your Tax Bracket. Are you in a low tax bracket? If so, have you maximized your bracket? Say you make $50,000…you’re in the 15% bracket, meaning that you make less than $73,000, why not convert $23,000 of your IRA/401(k) to a tax-free Roth…all at a 15% tax rate? The same logic may hold true for the 25% bracket, those making less than $148,000, married filing joint.

6) Beneficiary Boo Boo. One of the benefits of a Roth is that you are not required to take a yearly RMTD (Required Minimum Taxable Distribution) at age 70 1/2 and older. This is welcome news for Roth IRA owners and their spouses, but when the Roth is passed to non-spouse beneficiaries they are required to take yearly RMDs (of course tax-free), which is often missed and penalties ensue. I suppose this requirement is to limit the amount of wealth that can be passed for generations, but the Roth is still a good deal because, if structured and invested properly, it may pass through 3 generations…all tax-free!

7) Missed RMD Before Conversion. If you’re 70 1/2 or older and subject to the dreaded required taxable distribution from your Traditional IRA be careful when converting to a Roth IRA. Contrary to common sense, before a Roth conversion takes place you must first satisfy your yearly IRA required distribution, then you may convert the remaining balance in your IRA to Roth.

8) Missing Beneficiaries. I know it sounds elementary, but I estimate about 2 out of every 3 prospective clients I meet with have incomplete beneficiary designations. It’s typically due to one of two mistakes. First, there are no beneficiaries listed beyond the primary beneficiary…with everything in life you must have a contingency plan, so make certain you have a contingent beneficiary listed on your Roth. Second, if there are beneficiaries listed they are vague…there’s a big difference between “named beneficiaries” and “designated beneficiaries”, be specific. List their name, DOB, social security number, and address to avoid confusion and problems upon inheriting the Roth.