Healthcare Provider Update: Healthcare Provider for Costco Wholesale: Costco Wholesale partners with a range of healthcare providers through its Costco Health Insurance Marketplace. This includes various insurers that offer health plans to members, with options for individual and family coverage as well as plans targeted towards small and large groups. Healthcare Cost Increases in 2026: In 2026, healthcare costs are poised to rise sharply, largely due to the anticipated expiration of enhanced federal premium subsidies for Affordable Care Act (ACA) marketplace plans. Without these subsidies, many enrollees could face premium increases exceeding 75%, dramatically impacting their out-of-pocket expenses. As leading insurers report significant revenue and profit growth, the convergence of high medical costs and aggressive rate hikes is set to create a challenging landscape for healthcare affordability. This situation compels individuals and employers alike to reconsider their healthcare strategies heading into 2026. Click here to learn more
'Costco Wholesale employees should consider contributing to both a Roth IRA and a 401k to optimize tax-free growth and enhance retirement savings, while remaining mindful of contribution limits and withdrawal guidelines to avoid costly penalties.' – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement.
'Costco Wholesale employees can enhance their retirement planning by using a Roth IRA alongside their 401k, while avoiding common mistakes like exceeding contribution limits and failing to update beneficiary information.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
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Common mistakes to avoid when managing a Roth IRA
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Key differences between traditional and Roth IRAs
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Strategies for optimizing Roth IRA benefits for Costco Wholesale employees
One of the best ways for Costco Wholesale employees to save for retirement is through an individual retirement account (IRA), with the Roth IRA standing out for its potential to provide tax-free withdrawals during retirement. However, managing a Roth IRA effectively requires a solid understanding of its rules. Errors such as incorrect beneficiary names, missed withdrawal guidelines, or exceeding contribution caps can result in penalties or the loss of tax-free benefits. To help your Roth IRA reach its full potential for long-term wealth creation, here are 11 common mistakes Costco Wholesale employees should avoid and tips on how to prevent them.
Important Takeaways
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- Contributions to a Roth IRA must be based on earned income and are subject to income limits.
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- A 6% annual penalty on excess contributions may apply if you exceed the contribution limits.
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- While beneficiaries must follow withdrawal rules, account holders are not required to take required minimum distributions (RMDs) during their lifetime.
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- Converting a traditional IRA to a Roth IRA can offer long-term tax benefits when done correctly.
Understanding the Differences Between Traditional and Roth IRAs
Before diving into the common mistakes, it's essential to understand the distinctions between a Roth IRA and a traditional IRA. With a Roth IRA, you pay taxes on the money before it is deposited, as contributions are made with after-tax dollars. However, if you meet the conditions of being over 59½ and having held the account for at least five years, both your original contributions and earnings are typically tax-free when you withdraw in retirement.
On the other hand, a traditional IRA allows you to make tax-deductible contributions, but taxes are due when you withdraw funds in retirement. You must also begin withdrawing minimum payments from a traditional IRA at age 73, which will increase to 75 starting in 2033. Unlike traditional IRAs, Roth IRAs have no distribution requirements during the account holder’s lifetime, which is beneficial for asset transfer purposes.
With certain exceptions, including for spouses and minor children, beneficiaries of Roth IRAs are required to withdraw the full balance within ten years after the original account holder’s death, following the SECURE Act of 2020. Understanding these rules is critical for both Costco Wholesale employees and their heirs.
1. Not Making Enough Money to Contribute
To contribute to a Roth IRA, Costco Wholesale employees must have earned income—like wages or income from self-employment. The contribution limit is based on the amount of money you make each year. Roth IRA contribution limits are generally $7,000 for those under 50 and $8,000 for those 50 and older. Income from dividends, interest, or rental income doesn’t count toward the contribution limit.
If you are married and file jointly, you may also be able to contribute to a non-working spouse’s Roth IRA, as long as the total contributions don’t exceed the combined earned income.
2. Making Too Much Money to Contribute
Your eligibility for a Roth IRA is also determined by your modified adjusted gross income (MAGI). The IRS phases out direct contributions to Roth IRAs once you reach certain income thresholds. These limits are adjusted for inflation each year. The income phase-out ranges for 2025 are:
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- $150,000 to $165,000 for single filers and heads of households
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- $236,000 to $246,000 for married couples filing jointly
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- $0 to $10,000 for married individuals filing separately (if they live with their spouse)
If your income falls within these ranges, your contribution limit may be reduced. If your income exceeds the highest limit, you cannot contribute to a Roth IRA.
3. Failing to Help Your Spouse
Although you can only contribute to a Roth IRA with your own earned income, there is an exception for married couples. If the working spouse earns enough to fund both contributions, they can contribute to a non-working spouse’s Roth IRA. This strategy can be particularly useful for couples looking to increase their retirement savings, potentially doubling their contributions over time.
4. Over-Contributing
If you exceed the Roth IRA contribution limit, a 6% penalty will be charged on the excess contribution until it is corrected. To avoid penalties, withdraw the excess contribution (along with any earnings on it) before you file your tax return.
If you miss the deadline for withdrawal, you can carry the excess contribution forward to the next year’s limit. Staying within the contribution limits helps you take full advantage of your Roth IRA without unnecessary costs.
5. Early Withdrawal of Earnings
Roth IRA contributions are made with after-tax dollars, so you can withdraw your contributions at any time without tax penalties. However, if you withdraw earnings before age 59½ or before the account has been open for at least five years, you may incur a 10% penalty along with income taxes.
There are exceptions to the penalty for certain situations, such as qualified educational expenses or first-time home purchases. While the 10% penalty can be avoided in these cases, income tax may still apply.
6. Violating the Rollover Rules
The IRS has a 60-day limit for rollovers between IRAs. You can only perform one rollover within a 365-day period. Direct transfers between IRAs don’t count toward this limit and are not subject to the same restrictions.
Exceeding the rollover limit can result in tax penalties and, in some cases, the loss of your tax-deferred status. Be sure to follow the rollover rules carefully to avoid penalties.
7. Changing the Money on Your Own
Rollovers can be direct or indirect. A direct rollover involves moving the money directly from one account to another, which eliminates the risk of missing the 60-day deadline.
An indirect rollover requires you to temporarily hold the money before transferring it to the new account. If you don’t deposit the funds within 60 days, you’ll face taxes and penalties.
8. Not Considering a Backdoor Roth IRA
If you make too much money to contribute directly to a Roth IRA, you can still fund one through a strategy known as a 'backdoor Roth IRA.' This involves making non-deductible contributions to a traditional IRA and then converting it to a Roth IRA. Since earnings on the conversion are taxable, it’s important to complete the conversion as quickly as possible to mitigate taxable gains.
For high-income Costco Wholesale employees who want to take advantage of Roth IRAs despite income limits, the backdoor Roth IRA may be a valuable option.
9. Ignoring Beneficiary Designations
Beneficiary designation is a critical but often overlooked part of managing a Roth IRA. If beneficiaries are not updated, or if the account holder fails to designate beneficiaries after significant life events such as marriage or divorce, the Roth IRA may have to go through probate. This can delay the transfer of assets and incur additional expenses for your heirs.
Review your beneficiary list regularly and make any necessary changes to help your assets pass smoothly to your intended heirs.
10. Not Withdrawing Inherited Roth Funds
The SECURE Act of 2019 changed the rules for inheriting Roth IRAs. Beneficiaries, excluding spouses, must withdraw the entire balance of the inherited Roth IRA within 10 years. Some exceptions apply, such as for minor children, but this 10-year rule generally applies.
It’s crucial for beneficiaries to understand the withdrawal timeline to avoid tax penalties. Withdrawals are typically tax-free if the account has been open for at least five years.
11. Ignoring the Benefits of a Roth When You Already Have a 401k
Many Costco Wholesale employees may be unaware of the benefits of contributing to a Roth IRA in addition to their 401k. While 401k plans often provide employer matching contributions, Roth IRAs offer significant tax-free growth potential and more flexibility in retirement planning.
Contributing to both a 401k and a Roth IRA can help increase retirement savings and provide a diverse range of tax benefits.
In Conclusion
Roth IRAs offer numerous advantages, including tax-free withdrawals, no required minimum distributions during your lifetime, and the ability to transfer assets to heirs with minimal tax impact. However, to fully benefit from these advantages, it’s important to avoid common mistakes like over-contributing, ignoring withdrawal rules, or neglecting to update beneficiary information. By being vigilant about the regulations and actively managing your Roth IRA, you can play a key role in shaping your future.
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Sources:
1. Russell, Rob. '8 Roth IRA Mistakes To Avoid.' Forbes , 30 May 2014, www.forbes.com/sites/robrussell/2014/05/30/8-roth-ira-mistakes-to-avoid/ .
2. Backman, Maurie. '11 Mistakes to Avoid With Your Roth IRA.' Investopedia , 10 Apr. 2015, www.investopedia.com/articles/retirement/041015/11-mistakes-avoid-your-roth-ira.asp .
3. O'Connell, Brian. '10 IRA Mistakes to Avoid.' U.S. News & World Report , 25 Mar. 2025, money.usnews.com/money/retirement/articles/10-ira-mistakes-to-avoid.
4. Schlesinger, Jill. '5 Roth IRA Investments You Should Always Avoid.' Forbes , 24 Apr. 2019, www.forbes.com/sites/jillsschlesinger/2019/04/24/5-roth-ira-investments-you-should-always-avoid/ .
5. Hannon, Kerry. 'How a Roth IRA Conversion Can Help You Pass On More Wealth.' Money , 22 Apr. 2016, money.com/money/retirement/article/how-a-roth-ira-conversion-can-help-you-pass-on-more-wealth/.
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Costco implements its 401(k) retirement plan by providing eligible employees with options to save for retirement through pre-tax contributions, which are matched by the company to a certain extent. Employees can contribute a percentage of their salary, and Costco offers matching contributions to support long-term savings. The vesting schedule typically ensures employees gain full rights to these contributions over a period, promoting loyalty and retention.
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For healthcare benefits nearing retirement, Costco provides employees with a range of options that can integrate with Medicare or other post-retirement health plans. These options help employees manage healthcare expenses as part of their broader retirement planning strategy, ensuring that healthcare costs are mitigated during retirement years.
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Deferred compensation plans at Costco allow employees to defer a portion of their income, reducing their taxable income in the present and postponing tax obligations until retirement when they may be in a lower tax bracket. These plans are typically used as a part of a broader financial retirement strategy, with eligibility criteria and options varying by employee role and tenure.
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Costco ensures competitiveness in retirement benefits by benchmarking against industry standards, ensuring its offerings are attractive to both new and existing employees. By maintaining competitive benefits, including 401(k) matching and deferred compensation, Costco uses these packages to support employee retention and satisfaction.
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Costco offers several resources to aid the retirement transition, including financial planning tools, counseling services, and seminars aimed at helping employees maximize their benefits. Employees are encouraged to engage with these resources early to better prepare for retirement and take full advantage of available benefits.
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Employee contributions to Costco’s 401(k) plan are managed through a system that allows employees to invest their contributions in a variety of investment options. The company matches a portion of these contributions, and employees can monitor and adjust their contributions as part of their overall retirement savings strategy.
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Employees can contact Costco for retirement benefits information through HR support lines, online employee portals, or in-person consultations with benefits specialists. This allows employees to stay informed about their retirement plans and any potential updates that may impact their long-term financial planning.