Everyday you make choices that could effect you for the rest of your life. Choosing between which whole grain cereal you eat may not make that big of a difference, but picking different retirement plans could. Stated below are details about a Roth IRA and what it has to offer.
All retirement accounts are not the same, each offers something slightly different than the last one and will suite you best depending on your financials. When owning a Roth IRA there are specific contribution limits and Roth IRA income limits, thus if you make over a specific amount of money you can not contribute. For all filing statuses making over $180,000 a year is to much so if you make over this you will have to choose a different retirement account.
Roth IRA annual contribution limits basically work in a similar way. Depending on your filing status and income will determine how much money you can contribute each year to your Roth. The range of contribution can be from full to partial, full contribution for the last few years has been $5,000 if you are under 59, and a thousand more if you are over that age.
Most other IRAs do not have contribution limits, but a Roth is different in this way. The reason may be because on a Traditional IRA your money is tax deferred until you withdrawal funds, and a Roth IRA has already had taxes taken out when the money is placed into the account. Thus a Roth IRA is tax free when funds are withdrawn, at least on direct contributions.
There are two rules that apply to funds in a Roth IRA if the funds being taken out are not direct contributions. Rollover funds can be taken out if the seasoning period has passed, which is currently a five year wait. The growth on the money placed into an account can be withdrawn if the owner is 59.5 years old and the seasoning period has passed, otherwise a penalty will apply.
