What Is A Roth IRA?Definition Of Roth IRAWhat is a Roth IRA. This is a retirement savings account that allows you to grow your retirement savings tax free. This is a very easy and very effective way to grow and shelter your planned retirement income. The great advantage to the Roth IRA is that you only pay tax on your income once. Once the money is placed in the Roth IRA you are no longer charged tax on the growth and the capitol gains on that investment. This is where the Roth varies from the Deductible IRA. On the Deductible IRA you are taxed on money withdrawn from the account. There are some additional benefits to the Roth: It requires no additional reporting to the IRS. Tax liability is paid up front so no additional taxes are incurred, this means no more paper work! The allowable annual limit is post tax. This mean that your $5000 limit is actually $5000, not $5000 - tax. Great flexibility. Again all tax liability is taken care of up front meaning fewer restrictions. You also do not have to start withdrawing money by a certain age. There are some restrictions and rules on the Roth IRA, generally (but check) -An income of less than $116 000 per year. -You must be single or married filling jointly. -Maximum contribution of $5000 per year (there are exceptions to this). The Roth IRA is a retirement account so penalties do apply for early withdrawal. The maturity date is 59.5 years old or 5 years after the first deposit was made, which ever is later. I hope this has been helpful.
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