What is Roth IRA

An Individual Retirement Account is one way to start putting money away for retirement.  Otherwise known as IRA's, they are the fastest growing investment plan going today.  Large companies offer a 401k retirement plan and some offer profit sharing plans that are a great way to start saving for the future.  Smaller businesses tend to offer the 403b retirement plan.  IRA's are becoming increasingly popular due to the high cost of living.  People are concerned about how they will financially survive, and if they will even have the option to retire!

The Roth IRA is a great way to start saving money for retirement.  This type of investment will allow a person to save and earn money with out having it taxed. Because it is basically already taxed once, when it is withdrawn it doesn't get taxed a second time. Another great quality of this type of investment is that there are no age requirements to have this IRA.  Now then, if a person has this IRA and withdraws money from it before they are the age of 59 1/2, then they get assessed a 10% penalty for early withdrawal.  After the age of 59 1/2, however, there is no early withdrawal penalty on a Roth IRA.  Also, if an individual has traditional IRA's and wants to convert them into Roth IRA's, there is no early withdrawal penalties.  This same rule goes for the beneficiary, as well. The Roth IRA does not require a minimum distribution either.  So as you can see, there are many benefits to purchasing Roth IRA.  There are a couple of drawbacks to a Roth IRA. One of the biggest is that it is non-tax deductible.  Another downfall is that there is an income requirement that applies.  A single person must have an annual income of $95,000 or less, and a married couple must not exceed an annual income of $150.000 per year. 

With a regular IRA, there are age requirements but not income requirements.  They are also tax deductible, and penalties are applied if premature withdrawal takes place.

Before purchasing an IRA of either type, it is recommended that you talk to a financial planner and weigh out the differences.  Situations and circumstances are different for everyone and these need to be considered in the decision making process.   Also there a number of resources on the World Wide Web that a person can research for information. 

Recommended: Use your Self-Directed IRA, Roth or 401(k) Plan + Loans to buy investment property