Roth Ira

Do you need a way to save for retirement? Are you not satisfied with your employer sponsored 401k plan? Do you want to hold a tax-deferred retirement saving vehicle as opposed to a tax-deductible retirement saving vehicle? Then you should look at a retirement Roth IRA.

Before running out to open a retirement Roth IRA, you should understand what the retirement Roth IRA is all about. The following paragraphs will detail the rules to the holding a retirement Roth IRA.

Let us first talk about the tax structure. The retirement Roth IRA is a tax-deferred retirement savings vehicle. What that means is that the contributions you put into the account and the earnings that you make from the account will not be taxed when you begin to withdraw them. That is the retirement Roth IRA's main advantage.

The rules start here. The most important rule is that you cannot begin to take contributions from your Roth IRA before 59 and a half years old. If you take distributions before you are 59 and a half years old, you will be taxed and accessed a penalty fee of 10% of the earnings that your retirement Roth IRA has made.

The next rule will, if broken, will again cost you some money. You cannot begin to take distributions from your retirement Roth IRA before the Roth IRA account has been open for 5 years. That is right, if your retirement Roth IRA has been open for less than 5 years and you want to begin taking distributions, you will again be taxed and accessed a 10% penalty on the earnings of your retirement Roth IRA.

There are some exceptions when it comes to the issue of early withdrawals. What that means is that if you need the money for a qualified exception, an early withdrawal will be allowed penalty free. Some of those qualified exceptions follow.

If you are a first time home buyer, the IRS will allow you to withdraw up to $10,000 towards a down payment. You will not pay a penalty and you will not pay taxes, but the rule about the account having been open for at least five years still applies.

If you are going back to college to further your education, the IRS will allow you to take a distribution to pay for qualified educational expenses. Again, you will not pay taxes and you will not pay the penalty fee, given, of course, the five-year rule is not violated.

You will also be allowed to pay excessive medical expenses with a distribution from your retirement Roth IRA without a penalty. And of course, if you owe the IRS back taxes, you will be allowed to take a distribution from your retirement Roth IRA with out any penalties.

That being said, this article should have provided you with a good starting point for starting your retirement Roth IRA…so start contributing to your own future.