What is a Roth IRA

Roth IRA’s are individual retirement accounts that provide you with a retirement of tax-free income. Eligibility and placement within these accounts are prominently determined by your income and tax bracket. A Roth IRA does not provide immediate, up-front tax deductions, like with traditional IRA accounts, but, if you follow the rules, Roth distributions are tax-free.

Thus, these accounts are ideal for lower-income, younger workers who don’t necessarily need an upfront tax deduction, but will greatly benefit from compounded growth. The appealing aspect of this type of account is that every penny stashed in your Roth IRA is YOUR money, meaning you can tap into your contributions at any-time, without paying taxes or incurring penalties (you cannot tap into the IRA earnings, however).

A Roth IRA should be considered if you are expecting your tax rates to increase during your retirement from your current rate. Roth IRA’s are also appealing to those who wish to minimize their retirement tax bite; or even wealthy, elderly taxpayer who wish to leave tax-free assets to their heirs.

You are allowed to have and contribute to a Roth IRA at any age so long as you have earned income from a job at least once. This includes people such as child actors to even Wal-Mart greeters.

The accounts, however, are only eligible to those who make less than $129,000 a year. If you make less than this amount, there are various categories you can fall into based on your income and marital status.
Speak to your banker for more information on creating a personalized Roth IRA based on your own needs.

Sources: RothIRA.com

Contact Us

Image courtesy of StockMonkeys.com


Copyright © 2017 Cash.com