Planning your retirement is a very important step. You need to balance and stabilize your financial future. Many have questions about different retirement plans that you hear about quite often. One of the best options is to open an IRA, which is an Individual Retirement Account or Arrangement. It allows individuals to set aside money annually with tax-deferred earnings till the onset of the withdrawals which begin generally at the age of 59 ½ years. These IRAs can be established at banks, mutual funds or stock brokerages.
A Roth IRA is a special type of IRA, which flourished under the Tax payer Relief Act of 1997, under the tax laws of the United States government. It is named after its Chief legislative sponsor and late senator of Delaware, William V Roth, Jr. It can be an individual retirement account or a joined one or even can be an annuity contract purchased from a life insurance company. It is acceptable for a Roth IRA to have investments in securities or stocks, bonds, Real estate and mutual funds etc.
Even though, very much similar to IRAs in general, a Roth IRA has few benefits.
One benefit is the after-tax money or dollar system that is particular only to a Roth IRA. The tax for the money being contributed is deducted at that time itself is not left for later deductions and hence, the withdrawals are totally tax-free under the conditions that you are above 59 and ½ years old and that your account has been established at least five years before the year of withdrawal. In short, you will not be taxed for the money or investments after you cross the age of 59 and ½ years.
Another benefit of this system is that you can make withdrawals at any time you want without being taxed for it. And, there are no mandatory minimum withdrawals from the age of 70 and ½ which is a common feature of most of the other IRAs. This means that you do not have to pay early distribution penalty on withdrawals and can save more at the same time. This also means that your investments or earnings grow tax-free. It makes it easier for you to save your money and take it out any time you need it. And one more plus point of a Roth IRA is that there is absolutely no age limits, neither for contribution nor for distribution or withdrawals.
Anyone who has an income within the limits of an IRA is eligible to open and use a Roth IRA. The limit is actually calculated and set on your modified adjusted gross income. Your outside incomes like dividends and interest rental properties etc cannot be considered and used as funds for a Roth IRA. You might not be able to enrol if your income crosses the limit.
Opening a Roth IRA will be a decision that turns your financial future around. Also to take control of that future, it is best to open a Roth IRA and start saving for retirement.
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