Tuesday, October 7, 2008

What Is A Roth IRA?

A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to the traditional IRA. It can either be an account or an annuity. To be a Roth IRA, it was be designated as such (when it is first set up). However, a SEP-IRA and SIMPLE IRA can neither be designated as a Roth IRA.

Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA . But if you satisfy the requirements, qualified distributions are free. Contributions can be made to your Roth IRA after you reach age 70 1/2 and you can leave amounts in your Roth IRA as long as you live.

How Much Can Be Contributed-

You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).

Roth IRAs are tax-free retirement savings vehicles. By permitting tax-free withdrawls, contributions made early in your working life receive the greatest tax benefit.

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