 |
Roth IRA
One of the more high profile changes brought on by the Taxpayer
Relief Act of 1997 was the Roth IRA, introduced by Republican
Senator William Roth Jr. from Delaware. With a Roth IRA, your
earnings compound without annual taxation and, when you retire,
withdrawals are tax-free.
You should know the following Roth IRA facts:
- Roth IRA contributions are not tax deductible.
- You can contribute up to $2,000 a year to a Roth.
- You can only open a Roth if you earn less than $95,000
($150,000 for joint filers).
- After you’ve owned your Roth IRA account for 5 years
or more, you may take out money for certain qualified expenses
without having to pay an early withdrawal penalty.
- Qualified expenses include buying a first home; paying
for qualifying medical expenses, health insurance premiums,
and disability costs; and passing the age of 59½.
- You are not required to begin taking contributions at
age 70½.
- You can continue contributing up to $2,000 per year of
earned income past age 70½.
Consider a Roth IRA if:
- You do not need your funds for at least 5 years.You want
to work and contribute income to your account past age 70½.
- You anticipate needing your money for a qualified reason
before age 60.
- You expect to be in a high tax bracket during retirement.
- You’re looking to build a tax-free inheritance for
your heirs.
- You’ve never before qualified for tax deductions
on regular IRA contributions.
|
|
