Chances are that you've already heard about the Roth IRA but are not entirely sure of what it is and what makes it different from a regular IRA. Of course, there are lots of information that make up the complete Roth IRA guide, but it may take time for you to grasp it all. Right now you just want to know some of the basics of a Roth IRA so that you can decide if it is a decision that is right for you.
What Is A Roth IRA?
The term IRA refers to an "individual retirement account," which is a type of account created specifically to put away money for your retirement. The money in this account is used to trade in different types of securities and other types of investments in order to increase your investments over time. They differ from other investment accounts in that an IRA also provides you with specific tax benefits and the difference between the two IRA accounts lie in the types of tax benefits that each of them provide. Traditional IRAs allow you to make tax-deductible contributions, which mean that the amount you contribute is not taxed before it is put in the account.
Income Limitations
Roth IRAs are not for everyone; there are some people who are not allowed to contribute to a Roth IRA. There are income limitations and those who are above a certain amount will not be allowed to contribute to the account. For 2014, a single filer with income over $129,000 is not allowed to contribute and those with incomes that fall between $114,000 and $129,000 will be limited as to how much they can contribute.
You Can Convert From A Traditional IRA To A Roth IRA
If you lose your job you have the option to convert your traditional IRA to a Roth IRA. Just keep in mind that you are going to be expected to pay taxes on the amount you convert but when you realize the additional tax benefits of a Roth it might be worth paying now for the advantages you'll get later.
Watch Your Distributions
While it may be comforting to know that the money held in a Roth IRA is available to you it is still important for you to be careful when taking a distribution. While any money you contribute to the IRA is available at any time you need it, any distributions that you take of the earned money could incur tax consequences or penalties. According to the Complete Roth IRA Guide there are cases where withdrawals are allowed that won't incur these negative consequences and penalties.
There is no way that you can learn all about the Roth IRA in just a page or two on the Internet. If you're considering opening up this type of account to save for your retirement it is strongly suggested that you learn everything you can about them from the Complete Roth IRA Guide before you decide. While there are many benefits to having this type of account there are many governmental rules that must be adhered to. Once you know these you'll be in a better position to decide of a Roth IRA will be right for you.