As you prepare for your retirement, it is crucial that you look into your options regarding the best Roth IRA decisions. Well-informed choices are important when considering the tax implications of creating and making the most of your nest egg.
A retirement fund in which the money you put in is post-tax rather than pre-tax is called a Roth individual retirement account. Unlike a traditional individual retirement account, you have already paid your income taxes on the money that you put into a Roth. However, you do not have to pay taxes a second time upon retirement. Do you think that you will be earning more money than you are now when you reach retirement age, and will therefore be in a higher tax bracket? If so, a Roth IRA might be the ideal option for you. Keep in mind there are no immediate advantages to the Roth as there are with the Traditional IRA, meaning that the tax advantages will happen when you retire, not now. If you can afford this, it may be worth the wait.
Should you choose to open a Roth IRA, then you must keep in mind that Roth IRA limits exist. There is currently an income limit for the Roth. Those earning more than $105,000 as single filers are not fully eligible for the Roth. The cut-off limit may change and IRS regulations vary year to year, so check with the IRS regarding not only the income limit but also penalties for earnings distributions before age 59 . In addition, should you choose to take funds out before having a fund open for five years, there is a ten percent penalty for early withdrawal. Lastly, there are contribution limits for the individual retirement account, with the current limit being $5,000 per year. Please keep in mind that if you have put money in a Traditional IRA, then that counts toward the $5,000 maximum. What this means is that if you have put $4000 in a Traditional IRA for the year then you are only allowed to contribute $1000 to your Roth that same year.
If you have read about your options and the Roth individual retirement agreement seems like a good option for you, then you should also read about Roth Ira rollovers. A rollover simply means that the funds, which are sitting in your traditional retirement account, can be transferred over to a Roth for tax reasons. This way, you can benefit from a tax-free source of income upon retirement.
Yet it is important to remember that you will need to pay taxes on the retirement funds that you are rolling over, which could potentially create a real financial burden for you in your current economic situation. Please note that another consideration is that beginning in 2010, the adjusted gross income limits, which are currently in place for rolling over to a Roth, will no longer apply, though it will be best to consult the Internal Revenue Service and also review your options with your financial advisor or tax accountant.
One of the advantages of the 2010 changes is the unique opportunity to pay your taxes induced by the rollover over two years instead of one. Instead of paying up in 2010, you can pay over two more years 2011 and 2012, thereby easing your finances.
The best Roth IRA decisions are those based on a careful assessment of your needs and opportunities. Do not let the opportunities pass you by-instead, stay informed of IRS guidelines so that you can make wise choices. - 31821
A retirement fund in which the money you put in is post-tax rather than pre-tax is called a Roth individual retirement account. Unlike a traditional individual retirement account, you have already paid your income taxes on the money that you put into a Roth. However, you do not have to pay taxes a second time upon retirement. Do you think that you will be earning more money than you are now when you reach retirement age, and will therefore be in a higher tax bracket? If so, a Roth IRA might be the ideal option for you. Keep in mind there are no immediate advantages to the Roth as there are with the Traditional IRA, meaning that the tax advantages will happen when you retire, not now. If you can afford this, it may be worth the wait.
Should you choose to open a Roth IRA, then you must keep in mind that Roth IRA limits exist. There is currently an income limit for the Roth. Those earning more than $105,000 as single filers are not fully eligible for the Roth. The cut-off limit may change and IRS regulations vary year to year, so check with the IRS regarding not only the income limit but also penalties for earnings distributions before age 59 . In addition, should you choose to take funds out before having a fund open for five years, there is a ten percent penalty for early withdrawal. Lastly, there are contribution limits for the individual retirement account, with the current limit being $5,000 per year. Please keep in mind that if you have put money in a Traditional IRA, then that counts toward the $5,000 maximum. What this means is that if you have put $4000 in a Traditional IRA for the year then you are only allowed to contribute $1000 to your Roth that same year.
If you have read about your options and the Roth individual retirement agreement seems like a good option for you, then you should also read about Roth Ira rollovers. A rollover simply means that the funds, which are sitting in your traditional retirement account, can be transferred over to a Roth for tax reasons. This way, you can benefit from a tax-free source of income upon retirement.
Yet it is important to remember that you will need to pay taxes on the retirement funds that you are rolling over, which could potentially create a real financial burden for you in your current economic situation. Please note that another consideration is that beginning in 2010, the adjusted gross income limits, which are currently in place for rolling over to a Roth, will no longer apply, though it will be best to consult the Internal Revenue Service and also review your options with your financial advisor or tax accountant.
One of the advantages of the 2010 changes is the unique opportunity to pay your taxes induced by the rollover over two years instead of one. Instead of paying up in 2010, you can pay over two more years 2011 and 2012, thereby easing your finances.
The best Roth IRA decisions are those based on a careful assessment of your needs and opportunities. Do not let the opportunities pass you by-instead, stay informed of IRS guidelines so that you can make wise choices. - 31821
About the Author:
Bill Timmer is passionate about helping people achieve their dreams in retirement. How about you? Please visit his site on Top ROth IRAs. Also, find out information on when to cash out your ROth IRA.
