Why You Should Get A Roth IRA
If you are looking for a way to save towards your retirement then you should consider getting a Roth IRA (Individual Retirement Account) or get a 401K that both large and small businesses offer their employees. After setting up you have the right to start making contributions towards it. But when making IRA contributions you need to be aware of certain things and below we take a look at what these are in relation to a Roth IRA.
Firstly you are actually limited as to how much you can contribute towards an IRA in each financial year. It is currently no more than $4,000 or 100% of your earned income, depending on which is the lesser. However, if you are over the age of 50 your contribution limit to this type of IRA is $4,500. Plus there is no limit regarding age and a person is able to contribute at any age. You need to be aware that these differ from the 401K contribution limits.
For you to be able to contribute to your Roth IRA you need to have an income which is taxable and at any one time your adjusted gross income should be less than $110,000 for an individual or $160,000 for a couple who file joint returns. However, for couples who file their own separate returns this figure goes down to $100,000.
If you are also contributing towards a traditional IRA then the amount you can contribute towards your Roth IRA will be reduced. If making contributions to both kinds of IRA’s then these should not exceed the total amount allowed during any one financial year. Also with the Roth IRA your contributions will be reduced further should your income exceed a defined limit.
However there is another method you can use for contributing towards a Roth IRA known as the conversion method. This allows you to convert your traditional IRA over to Roth one. To do this you need to take the IRA out of one account and within 60 days of getting the funds immediately transfer it into your Roth IRA account. Although all Roth IRA contributions are taxable you should be aware that any withdrawals or distribution of the funds are not.
When you contribute to your IRA is up to you, and can be done at any time of the year. The deduction for the previous year can be taken as long as your contribution is done before April 15th. Remember IRA contributions are tax deductible and therefore should be reported on a tax return.
If you are looking for a retirement where you are financially secure it is worth investigating a little more how important having an IRA is. As part of your retirement planning you need to consider the pros and cons carefully of getting an IRA.
In this article we have looked at matters relating to Roth IRA contributions which you need to be aware of. Discuss this matter with your financial adviser. They will be able to recommend one that they feel is suitable for you and which will not only be a sound financial investment but will ensure that your retirement is much happier.
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