Save for Retirement with a Roth IRA Account
Saving for retirement is something most people don't want to think about when they are in their twentys but that is the perfect time to begin the process. The more money an individual can save for retirement, the more financially secure the golden years will be. There are mechanisms in place to help plan and save for retirement and the Roth IRA is one of them.
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A Roth IRA account is an Individual Retirement Arrangement allowed under the United States tax law and named for it's legislative sponsor Senator William Roth, late of Delaware. The Roth IRA has existed since 1998. A Roth IRA is subject to the same rules as a traditional IRA but with some exceptions.
A Roth IRA account can simply be a savings and/or investment account or an annuity and it must be designated as a Roth IRA when it is opened. Contributions to a Roth IRA account must be made from money earned through employment efforts. That effort can be self employment or employment through a legal business. The income can be wages, tips, salaries, bonuses and professional fees. The Roth account holder will be required to pay taxes on contributions. The benefit is no taxes are required to be paid on earnings or on the principal that is withdrawn from the account at any time. Investments in a Roth IRA can be used for a variety of investments such as stocks, bonds or certificates of deposit. The investor must not exceed established income requirements to contribute to a Roth IRA. The requirements are based on your modified adjusted gross income and vary based on the status on your income tax return.
In order to contribute to a Roth IRA account, the fund owner must not exceed maximum income criteria. The limits change from year to year. A Roth IRA account holder can contribute up to a specified amount between 02 January and the tax deadline of 15 April of the following year. For 2010, the maximum contribution is $5,000. The contribution limit changes with inflation and account holders age 50 and older have the ability of making additional catch up contributions. For 2010, that is $1,000. You will not be able to contribute to a Roth IRA if your income exceeds the income limit. You will be able to continue contributions when your income decreases or the limit is raised.
If one spouse has a Roth IRA account, the other can contribute to the account provided the couple files a joint tax return. Anyone at any age can open a Roth IRA account. Minors can establish and contribute to a Roth IRA provided the minor has verifiable income.
Contributions can be made to a Roth IRA account as well as a 401(k) or 402(b) plan without any contribution effects on either account. A traditional IRA converted to a Roth IRA account can still receive the current contributions during the year of conversion.
A Roth IRA account can be opened with any Roth IRA providers and they might be a bank, mutual fund companies, brokerage firms or insurance companies. Be sure to compare fees providers charge before choosing a Roth IRA account provider.
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Posted in Financial Services Post Date 07/24/2021
