Roth Ira
The Roth IRA was part of the Taxpayer Relief Act of 1997 which became law on January 1, 1998. When considering options for a retirement investment account, the Roth IRA should be a major consideration. In order to become as educated as possible, one must examine exactly what a Roth Ira is.
The Roth IRA, unlike the traditional IRA does not allow up-front tax deductions for contributions to the account. This is one of the main Roth IRA rules but this trade off actually works to the benefit of most people. Since the Roth IRA is taxed before the deposits are made the account and all of its interest is tax-free at withdrawal.
Roth IRA eligibility is determined pretty much by your income. First either you or your spouse must have qualifying income equal to or more than the contribution, and secondly your income can't be above $105,000 for a single person and $166,000 for married couples filing jointly For 2009 Roth IRA contribution limits are $5000 for people under 50 and $6000 for those over that age.
Two other major advantages of the Roth IRA are: 1) the minimum distribution rules are not applied. This means that unless you need the money you aren't required to start withdrawing it at 70.5 like the traditional IRA. 2) You are allowed to make some types of early withdrawals without paying an early distribution penalty.
Establishing a Roth IRA is very simple. Simply open a Roth IRA account and make regular contributions or convert a traditional IRA over to a Roth IRA. If you are going to convert a traditional IRA over to a Roth IRA some rules must be followed. Your modified adjusted gross income must be no more than $100,000 and you must be filing single or married filing jointly.
Although the upfront disadvantages of the Roth IRA may seem inconvenient, the advantages at retirement far outweigh those. All things considered, most people who qualify for a Roth IRA will benefit tremendously over a traditional one.
