Roth IRA
The benefits and the rigidity of Roth IRA
Roth IRA was incepted in 1997 and enacted in 1998. Its chief sponsor was late Senator William Roth Jr. who belonged to Delaware. Roth IRA is quite unlike other pension plans and traditional IRAs. In other plans the taxes are deducted from savings and earnings after withdrawal while in Roth IRA, the contribution is deducted right in the beginning itself. Moreover, it works on an automated computer system so the taxes are automatically deducted.
In traditional IRAs there is no maximum limit plan while in Roth IRA there is a maximum income limit that needs to be considered. Individuals earning beyond that limit do not qualify for Roth IRA.
Each year, the IRS revises the income limits and the contribution limit; however, the IRS has not revised the limits from 2010. In 2011 as well, for people aged 50 and above, the maximum contribution is $6000 while for those who are younger than age 50, the maximum contribution is $5000.
Roth IRA is also flexible when it comes to holding all types of investments. In addition to that, one can withdraw the principal amount anytime so this makes a great fund for contingencies and emergencies. Another great thing about Roth IRA which very few people know is that if you get sued, it is very difficult for the plaintiff to claim the funds in your Roth IRA.
The only rigid thing about Roth IRA is the strict income limits. Apart from that, many critics feel that Roth IRA may not be the best option available since it puts the retired individual in a higher tax bracket. Moreover, it is highly likely that by that time income tax rates may go way up.
It is recommended to go through Publication 590 of the IRS to check the income limits and consult a financial planner before deciding to invest.
In traditional IRAs there is no maximum limit plan while in Roth IRA there is a maximum income limit that needs to be considered. Individuals earning beyond that limit do not qualify for Roth IRA.
Each year, the IRS revises the income limits and the contribution limit; however, the IRS has not revised the limits from 2010. In 2011 as well, for people aged 50 and above, the maximum contribution is $6000 while for those who are younger than age 50, the maximum contribution is $5000.
Roth IRA is also flexible when it comes to holding all types of investments. In addition to that, one can withdraw the principal amount anytime so this makes a great fund for contingencies and emergencies. Another great thing about Roth IRA which very few people know is that if you get sued, it is very difficult for the plaintiff to claim the funds in your Roth IRA.
The only rigid thing about Roth IRA is the strict income limits. Apart from that, many critics feel that Roth IRA may not be the best option available since it puts the retired individual in a higher tax bracket. Moreover, it is highly likely that by that time income tax rates may go way up.
It is recommended to go through Publication 590 of the IRS to check the income limits and consult a financial planner before deciding to invest.
