If you plan to retire, you need to have money to support yourself during retirement. There are several ways to support yourself during retirement. Most individuals will be able to support themselves somewhat with Social Security benefits. Others will also have a pension. Tensions have become less common among the workplace. Finally, you can supplement either type of retirement account with a tax advantage retirement account such as Roth Ira.
What is a Roth Ira? There are two types of individual retirement accounts to begin with. There is the traditional IRA and the Roth IRA. A traditional IRA allows you to deposit money into the account without paying taxes on it at that time. When you withdraw the money at retirement, you have to pay income taxes. With a Roth IRA, you pay taxes on the money before it goes into the account. When you withdraw it during retirement, you do not have to pay any taxes, including taxes on the earnings.
A Roth IRA withdrawal can be made after age 59 ½. There are times when you can make withdrawals without penalties if you are below the age of 59 ½. For example, if you are disabled or you plan to use the money for qualified first time home buyer expenses, you may be able to withdraw the money without penalty.
A Roth IRA is a great option for your retirement account portfolio. You can use an IRA in addition to a 401K or other types of retirement accounts. If you’re able to max out your retirement accounts, you will ensure that you have enough to support yourself during retirement, whether you retire at the average retirement age or earlier. You can set up a Roth IRA at many banks or credit unions or through an investment broker. Set-up your retirement account sooner than later to get the most interests possible.
- Knowing the Roth IRA Tax Rules (2011tax.org)
- Are Roth IRA’s The Best Places To Save For Retirement (2009tax.org)