Roth Ira
A ROTH-IRA is a tpe of account where you can hold your investments. It has been referred to as
a retirement account, but it offers the investor much more flexibility than what one expects from
a retirement account. Money you put in your ROTH can be invested in any kind of security and
can grow tax-free.
Who Qualifies?
Individuals with Adjusted Gross Income of less than $95,000.
Couples with Adjusted Gross Income of less than $150,000.
What Are The Benefits?
Earnings grow tax-free with no taxes due upon retirement.
If open for 5 years, beneficiaries don’t pay tax on proceeds.
You are not required to withdraw money from your ROTH at age 70.5.
You can withdraw contributions tax-free and penalty-free at any time.
If open for 5 years, withdrawals up to $10,000 are allowed for a first-time home purchase.
Withdrawals can also be used for qualified college expenses, disability, and certain medical
expenses.
Are There Any Drawbacks?
ROTHs are not tax-deductible, like the traditional IRA.
You can’t contribute more than $4,000 to the ROTH for year 2005.
Married couples must file taxes jointly, not separately, to be eligible.
ROTH accounts must be opened as individual accounts - no joint ROTHs are allowed.
You should be in a ROTH IRA because:
You should always try to max out your tax-deferred and tax-free investment options first;
capital gains in a ROTH are tax-free.
You can always take out contributions tax-free/penalty-free at any time.
It is a great vehicle for first-time home buyers.
It’s a great way to leave beneficiaries an inheritance.
You can shield yourself from the capital gains tax that mutual funds cause.
You can use it to supplement an Educational-IRA for your children.
Remember:
A ROTH can hold stocks, bonds and/or mutual funds.
A ROTH is simply a holding account that shields your portfolio from taxes.
Everyone who is eligible should open a ROTH-IRA account
