Roth Ira

Are you thinking about opening a Roth IRA account? Are you weighing the advantages and disadvantages of opening a Roth IRA as opposed to some other retirement saving vehicle? If so, you should read on. Here we will discuss the ins and outs of opening a Roth IRA as opposed to some other retirement saving vehicle.

So, the first question that most people want an answer to is "What is/are the benefit(s) of opening a Roth IRA account as opposed some other retirement account?" The answer, in short, is that the Roth IRA account is tax deferred. So any contributions that you make over the life of the account will never be taxed again. Even your earnings will not be taxed. Of course there are always exceptions, which we will take about later.

The second question is usually "Can anyone open a Roth IRA account?" No. The Roth IRA has some income restrictions and not everyone applies, but if you don't apply, you probably have hoards of cash saved up for retirement elsewhere.

The limits are as follows. Individuals earning less than $95,000 a year can contribute up to $3,000. If you make more than $95,000 and year but less than $110,000 a year, you can contribute a decreasing amount of money until you hit the $110,000 a year mark.

Joint tax filers earning less than $150,000 a year can contribute up to $3,000 a year per individual. Joint tax filers making more than $150,000 a year but less than $160,000 a year can contribute diminishing amounts until they reach the $160,000 a year mark.

If you are age 50 years or older, you can contribute an additional $500 to catch up, this is called a "catch-up contribution." Not only that, but you can contribute money into your Roth IRA account indefinitely. Unlike a lot of other retirement saving vehicles, which limit you to the age of 70 years to contribute, you can contribute to a Roth IRA account until the day you die…hopefully well past 70 years old.

The third question is usually "What are the down sides to opening a Roth IRA?" The first and the biggest disadvantage opening a Roth IRA presents is that it is not tax deductible. That means that the money you contribute to the Roth IRA account is taxed first, then put into the account.

But that is also one of its advantages…not being tax deductible means it is tax-deferred. If you think that your tax bracket will move up when you retire, then the Roth IRA is for you. Having paid taxes before putting the money into the account means that when you begin distributions you will be receiving the money entirely "tax-free."

So if you are thinking about opening a Roth IRA account and can deal with the income limits and additional rules, then you should go ahead and open one. You will not regret opening a Roth IRA and receiving those great tax deferment benefits.