Why Roth IRA Secrets?
I am a Certified Public Accountant, tax-guy, and all around Roth IRA fan. Many people don’t know about the benefit of the Roth IRA and those that do often are not taken full advantage. This writing is big picture and designed to give you enough information to continue on to the detailed research by yourself or with a qualified person. Consider this as a general introduction. It is not about tax tables, exact contribution limits, and very specific information. That is what Google is for. Please enjoy this short and valuable guide and provide feedback online and at Support@AccountingPlay.com Roth IRA Secrets is to be educational in nature and not to be interpreted as tax or legal advice.
What is a Roth IRA?
Get a Roth IRA, it is a no brainer. But before you get one, you should probably have an idea about what one actually is. Roth IRA stands for a Roth Individual Retirement Account. It is a type of account that the government allows you to contribute money to each year, in theory, for retirement. The massive benefit of this account, is that any money you earn in the account from interest, dividends, and increases in investment value can be completely tax free if you follow the rules.
Roth example versus no Retirement plan
Let’s say Jane contributes $5,000 a year to her Roth for about 10 years and manages to retire at age 60. So she has $50,000 in contributions and whatever investment return she has made. Given a 4% to 8% return she might have anywhere from $100,000 to $200,000 in the account given the power of compounding investments. Now the entire amount is available to her tax free! Wowie. If she left it in a regular account she would be taxed the entire way and only have something like $90,000 in it. Why give money to the government if you don’t have to?
What are the general rules?
Most Americans can contribute money to a Roth IRA if they make less than about $100,000 a year and are working. There is a maximum of about $5,000 a year that you can contribute and you must wait until you are about fifty-nine and one-half before withdrawing earnings tax free. Wait! Keep reading, because you can still get to some the money if you know the Roth IRA Secrets. The rules change every year and I will only mention general age and contribution restrictions.
Finding current rules, contribution amounts, and restrictions
I do not waste time with current rules and rates, as this book is designed for the long-term and focus on the secrets, not tax tables. Google the following terms as needed:
*Current year Roth IRA contribution limits
*Current year Roth IRA income limits
*Current year Roth IRA catch up contributions
*Current year Roth IRA conversion rules
Summary of Secrets:
If you qualify...
*The account is a great savings bucket
*You have access to your original Roth contributions at any time, with no tax penalty
*You can invest in anything you want or nothing at all
*If you make very little you might receive a tax credit for contributing
*Roth IRA accounts are better protected from other creditors in general
*A spouse can have a Roth even if he or she does not work
*You can have a Roth even if you have other types of work related retirement accounts
*You can have a Roth and Traditional IRA if you want
*Your children can inherit your Roth IRA
*You might be able to establish a Roth IRA even if you have very high income limits
*There are Roth retirement options with employer provided plans
*There are amazing Roth options for self-employed people
*You can put money into a Roth that was given to you if you have earned income