Benefits for Retirement – What Is a Roth IRA
Individual Retirement Accounts provide either a tax-deferred or tax-free way for individuals to save for their retirement years.Â What is a Roth IRA? It is an account to hold investments, created in 1997 as a result of the Taxpayer Relief Act, and named for its sponsor, the late Senator William Roth. The Roth IRA is special . Rather than granting the tax break for money placed in the account, the tax break occurs when the money is taken out .Â In other words, the Roth IRA is not tax-deductible when contributions are made. A Roth IRA that is seasoned for a five year period allows both contributions and investment earnings to be withdrawn with no taxation or penalty for an owner at least 59 Â½ years old. The Roth IRA does not mandate required withdrawals to begin at age 70 Â½ years old as other types of IRAs do, so the account owner could choose to continue funding the account indefinitely. And no matter how much money the account earns over those years, it is all tax free. There are specific financial qualifiers to be eligible for a Roth IRA, and contributions are capped at $5000 annually , with a catch-up exception allowed for persons 50 years old and older that allows an extra $1000 annual contribution.Â What is a Roth IRA? It is possibly the most flexible individual retirement account, particularly for owners who select the self-directed Roth IRA. The self-directed Roth hands more control to the account owner, who can select the custodial firm and take advantage of non-traditional investment options for their account, including real estate, tax liens, or even gold and silver. The Roth IRA provides tax shelter for building retirement wealth . Contributions to the Roth are taxed as regular income for the year the contribution was made. The payoff occurs as the account seasons and the earnings grow tax-free, with the big advantage at retirement when the account holder has access to the money completely tax free.What is a Roth IRA? It might be the right plan for growing retirement wealth!