When making decisions about your retirement, it is vital that you look into the current tax implications regarding the best Roth IRA choices. A basic degree of financial knowledge is important when deciding what types of accounts are right for your retirement savings, and upcoming changes to tax law are important to consider.
The Roth individual retirement account is a retirement vehicle in which contributions are after-tax rather than pre-tax. What this means is that you have already paid taxes on the money you are putting into this account, and you will not have to pay taxes on this money again or upon distributions upon withdrawing the funds at retirement age. If you think that you will be earning more when reaching retirement and will therefore be in a higher tax bracket than you are presently, then a Roth IRA may be the best choice for you. However, it is important to consider that you will not gain the immediate advantages of a Traditional IRA-namely, the lowering of your current tax burden. Essentially it is best to think of this decision as being taxed now versus later.
If you decide to go for the Roth IRA, then you must remember that there are Roth IRA limits to be aware of. Most importantly, there is the income limit. If you earn more than $105,000 as a single filer, you may be ineligible a complete investment in the Roth. This figure may change depending upon inflation and IRS regulations. Another limitation is that earnings distributions cannot be made without penalty before age 59 , and they must be held in the Roth IRA for at least five years. Otherwise, if you choose to take funds out earlier, there is a ten percent penalty for early withdrawal. In addition, there is a contribution limit for the Roth IRA. The limits for the individual retirement account may change on a yearly basis, but the current limit is $5,000 per year. You must also keep in mind that if you have contributed to a Traditional IRA, then that does count toward your $5,000 maximum. That is, if you have put $2000 in a Traditional IRA then you may only contribute $3000 to your Roth for that 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 decision depends on your current income, estimated future income, and your particular tax situation. Knowing all of your options, especially now considering the 2010 changes to the tax rules, is important to making smart decisions about your future. - 30547
The Roth individual retirement account is a retirement vehicle in which contributions are after-tax rather than pre-tax. What this means is that you have already paid taxes on the money you are putting into this account, and you will not have to pay taxes on this money again or upon distributions upon withdrawing the funds at retirement age. If you think that you will be earning more when reaching retirement and will therefore be in a higher tax bracket than you are presently, then a Roth IRA may be the best choice for you. However, it is important to consider that you will not gain the immediate advantages of a Traditional IRA-namely, the lowering of your current tax burden. Essentially it is best to think of this decision as being taxed now versus later.
If you decide to go for the Roth IRA, then you must remember that there are Roth IRA limits to be aware of. Most importantly, there is the income limit. If you earn more than $105,000 as a single filer, you may be ineligible a complete investment in the Roth. This figure may change depending upon inflation and IRS regulations. Another limitation is that earnings distributions cannot be made without penalty before age 59 , and they must be held in the Roth IRA for at least five years. Otherwise, if you choose to take funds out earlier, there is a ten percent penalty for early withdrawal. In addition, there is a contribution limit for the Roth IRA. The limits for the individual retirement account may change on a yearly basis, but the current limit is $5,000 per year. You must also keep in mind that if you have contributed to a Traditional IRA, then that does count toward your $5,000 maximum. That is, if you have put $2000 in a Traditional IRA then you may only contribute $3000 to your Roth for that 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 decision depends on your current income, estimated future income, and your particular tax situation. Knowing all of your options, especially now considering the 2010 changes to the tax rules, is important to making smart decisions about your future. - 30547
About the Author:
Bill Timmer loves talking about Roth individual retirement accounts. How about you? Please visit his site on The Top ROth IRAs. Also, find out information on cashing out your Roth IRA!
