Tags: Retirement | retirement | Roth IRA

4 Things You Need to Know About Roth IRAs

By    |   Saturday, 13 June 2015 10:53 AM

Many investors planning for retirement consider the benefits to contributing to an IRA. One of the most popular types is the Roth IRA, which one analyst described as a gift from Uncle Sam.

Here are four things you need to know about investing in a Roth IRA.

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1. Taxes
The money you contribute to a Roth IRA is after-tax dollars. Since you've already paid taxes on it, you incur no taxes on that money when you withdraw it when you retire. For many, this benefit alone makes the Roth IRA choice attractive, CNN Money reported.

2. Withdrawals
With a Roth, you can withdraw money whenever you want for whatever you need. The only caveat is if you had a traditional IRA and you converted that to a Roth IRA you need to wait five years before withdrawal or you incur a penalty. If you withdraw funds before age 59.5, however, you will also be penalized unless your reason for withdrawal falls under the program's qualifying rules.

Among those certain circumstances are paying for costs associated with a sudden disability, paying for a first-time home purchase, paying off medical expenses that have growth to more than 7.5 percent of your adjusted gross income and paying for college, whether your own, or for your spouse, children or grandchildren.

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3. Required Minimum Distributions
If you've contributed to a Roth IRA, you don't have to make required minimum withdrawals at age 70.5. That differs from a traditional IRA, which requires you to start taking those distributions at that age.

“We believe that most people should consider a Roth IRA,” Ken Hevert, vice president of retirement products at Fidelity, told Forbes. “And that’s either by contributing to one or converting to one. Besides tax-free withdrawals, a Roth IRA also offers flexibility, doesn’t require distributions when you reach a certain age, and can benefit your heirs.”

4. Contributions
With a Roth IRA, you can keep making contributions after age 70.5. With a traditional IRA, after that age, you can no longer contribute. The limit to how much you can contribute to a Roth IRA in 2015 is $5,500 or $6,500 for those age 50 and older, according to the Internal Revenue Service.

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Many investors planning for retirement consider the benefits to contributing to an IRA. One of the most popular types is the Roth IRA, which one analyst described as a gift from Uncle Sam. Here are four things you need to know about investing in a Roth IRA.
retirement, Roth IRA
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2015-53-13
Saturday, 13 June 2015 10:53 AM
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