Those who are single with an adjustable gross income of less than 127,000.00 in 2013 or married with a combined income of less than 188,000.00 may find that a Roth IRA can provide many benefits. One of the biggest advantages of a Roth IRA is the tax incentives. A Roth IRA can help maximize retirement income and reduce taxes by allowing money to grow tax free. Since the money contributed to an IRA has already been taxed, there are no taxes upon withdrawal either if the owner is 59 1/2 or older. First time home buyers can also withdraw up to $10,000.00 tax free at any age to purchase a home. For 2013, people who are eligible can contribute up to $5000.00 to a Roth IRA. Those who are 50 years old or over can contribute up to $6500.00. A Roth IRA is an excellent savings vehicle for people of any age.
Unlike other types of retirement savings accounts, a Roth IRA does not have a minimum distribution requirement. This can help avoid taxable income that may result from withdrawing funds when they are not needed. Since the Roth IRA does not necessitate a minimum distribution, it allows the owner to bequeath a larger sum of the funds to their heirs. The Roth IRA also has substantial estate planning benefits such as non-taxable money for their heirs. A Roth IRA is a great way to save money for heirs. Converting to a Roth IRA may also reduce the amount of taxable assets in an estate.
Roth IRA withdrawals aren’t calculated into the modified adjustable gross income limit used to determine Medicare surtax. This can further reduce tax liabilities. A Roth IRA can also help protect investment income against future tax increases. Any money contributed to a Roth IRA can be withdrawn at anytime with no taxes or penalties. Only the earnings are placed under restrictions and those are lifted once the owner has reached 59 years of age and the 5 year anniversary of opening the account has passed. This gives the account holder a great deal of flexibility in managing their funds and can be a tremendous support in the event of a financial emergency.
There are no age requirements for making contributions to a Roth IRA. As long as there is earned income, an individual can continue to contribute to funds to the account. Opening an account is simple. A Roth IRA can be opened at a bank or an online broker. Many require no initial investment and require no maintenance fees. For those who earn too much to contribute to a Roth IRA, it may still be possible to take advantage of the tax benefits by converting other investment accounts to a Roth IRA. It is important to consider any penalties involved in the transfer to assure the benefits out weigh the penalties.
A Roth IRA gives the account owner the freedom to manage their retirement funds without restrictions and burdensome terms. An account owner need not withdraw from the account or perform any other activities. The Roth IRA will remain throughout the life of the owner and in the event of their death will provide the same tax benefits for their heirs.