A Roth IRA Has Many Advantages To Consider

A Roth IRA provides many unique advantages over a traditional IRA or 401k program, and while many use it to maximize anticipated tax breaks, there are other benefits that are more predictable. Whether looking for an easy way to start saving for retirement or don't have the amount of upfront cash to open a different type of account, the Roth IRA can suit almost any budget and help you to save money for later in life when you will no longer be working. To understand the benefits, let's talk about some basic ground rules first.

You need to have taxable earned income to open a Roth IRA account. This is a basic requirement for everyone, and you need to be working in order to get started. You will pay regular income tax like normal, but after taxes you can open a Roth IRA, and you can fund it every year, up to 5k at a time, or 6k if you are over 50 years of age. You cannot open another account if you want to deposit more, and the only way around this rule is to get married, where a joint or combined allowance is a little bit more.

However, for the vast majority of us, 5k is more than enough to invest per year, and the earlier you start, the more you will save over the course of your career. That being said, remember that you cannot withdrawal penalty free unless you have had your account for more than five years. This is important to keep in mind because a Roth IRA is designed to provide long term retirement investment savings as opposed to a quick profit generating instrument.

Additionally, you cannot make too much money because the ceiling for income is a tad bit over a hundred thousand dollars a year unless you are married, in which case it is a bit over 150k for the maximum income you can have in order to qualify.

Now for the good news. A Roth IRA account can be opened with very little or no money to start, and individual banks and financial planning companies all have different requirements. However, in order to compete for your business, many offer amazing terms that are easy to meet and maintain through out your investing life. So, shopping around until you find the best place to do business with is advantageous, and so is talking to a professional about your overall investment strategies and goals that you have in mind. You will benefit from their guidance and advice. Just do your best to avoid those who promise too much or use pressure tactics to try and get you to sign up with them.

Also, you can take money out of your account after five years, and minimize your tax risk, which is unlike other retirement plans. This is another reason the Roth IRA is so popular, and its flexibility gives investors more choice with how they will manage and have access to their money if the need it.

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