Roth IRA
Similarities between Roth IRA and Traditional IRA
Ever since it was enacted in 1998, Roth IRA has topped the list of investment and savings account in addition to being one of the best tax plans in the U.S. ever. Roth IRA is an excellent alternative for those who would like to a secure retired life as it lets the account holder withdraw the money at the age of 59 and half and that too without further taxes. The required taxes are already deducted at the time the contribution is made. However, prior to 59 and half, if earnings, which is the interest earned from investments are withdrawn a ten percent penalty in addition to federal and state taxes are incurred which is an enormous amount.
Following situations would give a much better idea for early withdrawals:
· The account holder may withdraw the principal amount he invested anytime. However, taking the actual contribution gets double taxes on the account and is against the law. So, the individual can withdraw this money for free.
· During certain exception situations such as permanent disability or medical emergencies the earnings in addition to the principal amount can be withdrawn without penalties.
· If the account holder passes away, the account is exempted from federal tax penalties upon distribution to the dependants and beneficiaries. However, taxes will be included in the gross estate of the investor concerned.
· First time home owner can withdraw amount up to $10,000 within their lifetime for house purchases and some money can also be utilized for educational purposes without tax penalties.
· In case the Roth IRA holder faces unemployment and receives unemployment benefit for at least 12 weeks, he can use the amount from the Roth IRA to be utilized to pay off his medical insurance premium.
Following situations would give a much better idea for early withdrawals:
· The account holder may withdraw the principal amount he invested anytime. However, taking the actual contribution gets double taxes on the account and is against the law. So, the individual can withdraw this money for free.
· During certain exception situations such as permanent disability or medical emergencies the earnings in addition to the principal amount can be withdrawn without penalties.
· If the account holder passes away, the account is exempted from federal tax penalties upon distribution to the dependants and beneficiaries. However, taxes will be included in the gross estate of the investor concerned.
· First time home owner can withdraw amount up to $10,000 within their lifetime for house purchases and some money can also be utilized for educational purposes without tax penalties.
· In case the Roth IRA holder faces unemployment and receives unemployment benefit for at least 12 weeks, he can use the amount from the Roth IRA to be utilized to pay off his medical insurance premium.
