You can’t learn all there is to know about Roth IRA’s in one minute, but after reading this article you should have a good understanding of the fundamentals.
What’s a Roth IRA?
The IRS defines a Roth IRA or Roth Individual Retirement Arrangement as a “…tax-favored account or annuity set up in the United States solely for the benefit of you or your beneficiaries.” In human language, a Roth IRA is essentially savings account intended for retirement that provides you tax benefits.
How Does a Roth IRA Benefit me?
- Partial or full deductions for IRA contributions.
- The possibility of tax reductions or untaxed deposits.
- Typically no taxation until withdrawal.
Things to Consider:
- There are differences between a Roth IRA and Traditional (Simple) IRA.
- There are limitations for who can obtain a Roth IRA depending on factors such as income such as: $129,000 for single earner or $191,000 for married filing jointly.
- There are strict limitations for what’s considered “compensation.”
For a more detailed account, visit the IRS website for a detailed account of Contributions to Individual Retirement Arrangements.