Roth IRA General Information

So, you decided to open an IRA account in order to invest your money. It's a very wise decision but you should first know that there are many different types of IRA accounts. That is why you will have to choose carefully when opening an IRA account as they all have their advantages and disadvantages and you don't want to make the wrong choice.

One of the most popular IRA accounts is the Roth IRA, as it offers many benefits. The Roth IRA account is a type of individual retirement account which offers contributors tax-free withdrawals as the original contributions to the account are made with after-tax money.

There are many differences between the Roth and the Traditional IRA. The main difference regards tax paying, as with a Traditional IRA, you invest pre-tax money, but when you decide to take the distributions from your account, there will be a lot of taxes and fees that you will have to pay. A Roth IRA doesn't require that you pay any taxes when taking the money out of the account, as you will have to pay income tax on the money that you are investing. This is a very big difference and a big advantage, as you won't have to worry about any taxes when you decide to retire. Also, another important difference between the two types of IRA accounts has to do with the timing of your withdraw. With both IRA accounts, you will have to wait until the age of 59 1/2 in order to make a withdrawal. Still, with a Traditional IRA, you must start making withdrawals at the age of 70 1/2, or you will have to face penalties. The Roth IRA doesn't have a required minimum distribution age. If you are over 70 1/2, you can still keep you your money in the IRA account and leave it there so it can keep growing, without having to face any penalties or additional fees.

Still, there are some limits to how much you can contribute yearly to you Roth IRA and whether you are or aren't eligible to contribute to an IRA account. If you earn more than $105,000 individually or if you and your spouse earn more than $166,000, you won't be able to contribute to an IRA account. Also, you will be able to contribute up to $5000 every year, or $6000 is you are over 50. You can make contributions anytime until April 15, thus allowing you to save money and contribute with larger amount to your Roth IRA account.

Having all of these in mind, you should be ready to make your decision. You will have to take into consideration other aspects as well before opening an account and you should probably do some more research before taking the decision. Banks and brokerage firms which offer you the possibility of opening an account will gladly help you make the decision that is best suited for your needs, so you should pay them a visit and ask for more details about Roth IRA.

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