Purchasing Roth IRA

When an individual is considering purchasing a Roth IRA, there are several considerations to research.  In most cases, the Roth IRA is a great way to save money for your retirement.  There are many advantages to the Roth IRA and few disadvantages.  A person needs to do their homework on the subject and get the information on each different retirement plan before purchasing it. 

The Taxpayer Relief Act was put in place in 1997 with the help of Senator William Roth.  It was put in place to help taxpayers save money for their retirement.  Thus, the name Roth IRA was born.  This retirement plan allows an individual to contribute money into their IRA with out having it taxed. There is no early withdrawal penalties applied if money is taken out after the age of 59 1/2.  Also there are no minimum distribution amounts that have to be made.   The Roth IRA retirement plan does have annual income guidelines to follow.  If a person is single, their gross annual income cannot be more than $95,000.  If married, the guideline for gross annual income increases to $150,000.  Unlike the traditional IRA, there are no age requirements. However, if you withdraw before the age of 59 1/2 there is a 10% penalty applied. The Roth IRA is non deductible. 

Another great benefit from a Roth IRA is that a person can convert a traditional IRA into a Roth IRA.  If a person decides to do this, there are no early withdrawal penalties applied.  There may be a conversion tax, but in the long run it could pay off.  One note to consider is that if a person has to hold out some of the money to pay the conversion tax, then maybe it is not the most favorable retirement plan to choose.

Purchasing a Roth IRA can be a profitable way to save money for your retirement. It might be a wise decision to talk to your financial advisor before deciding on a particular retirement plan.  There are some very informational websites that a person can research when making this decision.

When making this decision, a person needs to consider his or her own personal circumstances.  They need to evaluate what amount their contributions can be, and consider what retirement plan, if any, they already have in place.  If the employer is offering a 401k, then until it is maxed out, some advisors are discouraging looking into other retirement plans.

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