What Is A Roth IRA?

The Roth IRA

The Roth IRA, or Roth Individual Retirement Account, is a newer option available to those looking to protect and save assets and cash for their retirement.  A Roth IRA is offered by the government as a way for people to put money aside, including assets such as property, stocks, bonds, CD’s, and more, for their retirement years.  Roth IRA’s are designed not just to provide a place to save money, but a legal tax shelter.  With Roth IRA’s you will only be taxed on the assets as they go into the account, but never as they withdrawn.  In this way you can avoid being double taxed on the hard earned money you will need to have saved for when you reach retirement age.  It is advisable by experts across the board for every American, age regardless, to start putting the maximum amount they can into a Roth IRA retirement account now.

Roth IRA Contributions

While the U.S. government would like to make sure Americans have an avenue available to them to put money into their retirement accounts, it is not without restriction.  As of 2009, the maximum amount that one can deposit in a single Roth IRA savings account is $5,000 annually.  And this amount only if their income is above that figure.  Additionally if your income is more than $120,000 for single-filers or $176,000 for joint-filers, you will not qualify for a Roth IRA retirement account.

Roth IRA Advantages

There are many advantages to a Roth IRA retirement account over a traditional IRA account.  It is for this reason that many Americans are choosing to roll their traditional IRA accounts into Roth IRAs even when facing taxes during the changeover.  Some IRA Roth benefits are:

While restricted to a 5 year “seasoning” period, money can be withdrawn from a Roth IRA account without taxes being assessed as income such as is the case with a traditional IRA.

$10,000 allowance for tax free, penalty free withdrawal for use in purchasing a first primary residence

If the owner of the IRA Roth account passes away, their spouse will inherit the account tax free and then be able to combine their own tax free into a single account.

Roth accounts can be maintained while having a 401k retirement account at the same time

Related posts:

1. What Is A Traditional IRA?
2. What Is An IRA?
3. What Is A Retirement Account?
4. Is Investing Important?
5. How Do I Invest?