What is a Roth IRA
People often wonder about their golden age and they are ready to save as much as they can for their retirement. U.S government has many retirement plans available. One of it is the Roth IRA (Individual Retirement Arrangement) which is made for people to save money they have for their retirement. It is a special retirement plan which has been named after the name of the person who created it. It helps an individual to save money for his old age and all the money saved is tax free. This plan has a lot of resemblance to the traditional IRA but Roth IRA in some ways is far more beneficial than traditions IRA.
A Roth IRA account could be opened up in any bank just like any other account but it provides extraordinary growth to your investments. It provides you with tax free growth. All the investments deposited by you in your Roth IRA account will be the post tax dollars instead of pre tax dollars. So if an individual withdraws some amount after an age of 59 ½ then no tax amount will be deducted from his amount. Money could also be withdrawn before the age of 59 ½ in some cases such as money requirement for education expenses, health, death, disability etc and when you withdraw money you don’t have to pay any fee. In case of death of the account holder the money could be passed on to beneficiaries.
An IRA account can be opened by any individual provided he is eligible to open it. It can be opened up by an individual as well as a couple. A single tax payer should have an income lesser than $105,000 and couples could have combined income lesser than $167,000. An individual needs to specify the initial amount which he will deposit and the contribution he would made later on. There are many constraints on the amount of contribution one could make. An individual can contribute a sum not greater than $5000 and if he is of age greater than 50 then the constraint is relaxed to the amount of $6000.Married couple can deposit amount of not more than $10,000 yearly.
There are many advantages of Roth IRA over other IRAs. First of all it is very simple and flexible retirement plan and could be opened easily by any eligible individual. There are only a few restrictions as compared to other plans and your principal grows tax free. There is no withdrawal fee but in case you withdraw money from your Roth IRA account before the age of 59 ½ and without any appropriate reason then you will have to pay 10% withdrawal fee