subject: You Can Save Money With A Roth IRA Account [print this page] You Can Save Money With A Roth IRA Account
Copyright (c) 2011 Casey TrillbarWhen we think about retirement, we instantly connect it with relaxing and having a good time. To have this great time we need to plan our retirement well. One way of doing it is through a Roth IRA. IRA stands for Individual Retirement Account. Roth IRA account was created under the Tax Pater Relief Act of 1997. It is named after Senator William Roth. Roth IRA is meant for retirement. It is a personal savings plan where you get benefits for saving money for your retirement in the form of tax advantages.A Roth IRA can be an individual retirement account containing investments in different forms like securities, stocks, mutual funds etc... A Roth IRA can also be an individual retirement annuity. An annuity is an investment that you make. The payment can be done either as a lump or in the form of installments over years. For this you receive back a specific amount every year or every month or once in six years.This is either for life or for a fixed period. In this case it is an annuity contract purchased from an insurance company. IRAs are popular because there are fewer restrictions on investments when compared to other tax advantage plans. But the investment options available depends on the person who is investing or in other words, on the trustee.The amounts allowed invest are the amounts which are allowed under the tax law. These investments that you make are known as contributions. When you make a contribution in a tax year you gain from a tax deduction. This deduction comes in to effect when you make the contribution. These contributions accumulate tax free along with other gains. So IRA enables you generate more money since contributions grow in your account tax-free. IRA also has a facility called catch-up contributions. This is for those people who are aged 50 and above. However to use this facility, you must make the maximum regular contribution to your account.You are allowed to withdraw from your IRA account. These withdrawals are called distributions. Normally, when you receive distributions you will have to pay income tax on the amount. If you start withdrawing before the retiring age, which is normally 56 years and 6 months, you will have to pay a tax penalty. This penalty is 10 percent of the distributions that you receive before the normal retiring age. But certain exceptions are applicable. Once you cross the retiring age, this penalty does not apply.However this does not mean that you can keep the money in your IRA account for long. You will have to start taking out money from your account before you reach the age of 70 years and 5 months. Otherwise you will be penalized.Technically speaking almost all kinds of investments can be included in an IRA account. But certain investments are more suitable than others. In the IRA scheme you are also allowed to have multiple accounts with different institutions. Each IRA plan is different and offers different benefits. You need to choose what is best for you.
