Do you plan on saving money for retirement with a Roth IRA? Did you know that their are things you need to consider before you set this account up? These things would include qualifications, contributions rules, and withdrawal rules, and in this article I’m going to cover all 3 of these vital pieces.
Qualifications. Before you can even set up your account you need to consider the qualifications for Roth IRA accounts. First off, you need to have a job to qualify, if your out of work you can’t get one. On top of that you cannot earn more that $167,000 as your adjusted gross income on your tax returns. If you earn more than this you won’t be able to qualify for the tax advantage benefits.
Contributions. Once you’ve qualified for an account their are some contribution rules you have to follow. First off, you cannot contribute more than $5,000 in a given year unless you’re over the age of 50 at which point you will be able to contribute an extra $1000. On top of that their are only several different types of good financial investments you’re able to invest your money in with a Roth IRA. Some of these include mutual funds, stocks, bonds, money market accounts, exchange traded funds, and certificate of deposits just to name a few.
Withdrawals. The last thing you should know is that their are some specific withdrawal rules you must follow. First, if you take a withdrawal before age 59 and a half you will pay an added 10% tax penalty. This doesn’t mean your not allowed to take a withdrawal because their are specific things you can take a withdrawal for and not be penalized. Some of these things would include money for buying your first house, money for your children’s college education, or even if you are facing a hardship.
In the end following these simple rules and qualifications will ensure you don’t face a penalty and that you have a successful retirement.
- The Best IRA CD Rates for Your Roth IRA Account (2008taxes.org)
- IRA: Traditional IRA and Roth IRA (2010tax.org)