Last week, I mentioned Roth IRA‘s. A Roth is an individual retirement account to which many Americans can make a contribution. For 2012, if you are under 50 the maximum one can contribute is $5,000. However, if you are over 50, you may contribute as much as $6,000. Those that are single can contribute if their modified adjusted gross income is under $110,000 and if you are married and filing jointly, the cut off is $173,000 (modified adjusted gross income).
I am far from an expert but here are a few other basics to know about the Roth IRA:
-The Roth gives you the tax break later. The earnings and interest are tax free at withdrawal. However, there is not an upfront tax break.
-If you need to make a withdrawal before retirement, you can do so tax free (and penalty free)-to a point. You can take any money you contributed to the account, but not the earnings.
-As long as you have a job, you can contribute at any age. So yes, your teenager can have a Roth!
-Earnings distributions can begin at age 59 1/2 penalty free (must be held a minimum of 5 years)
-Roths can be done via a variety of investments including CD’s, bonds, mutual funds, stocks, etc.
A Roth IRA is a great way to save for retirement. As I said, I am not a professional so please do your own research and I would also recommend consulting with a tax professional before making a decision on a Roth.