3 Things To Know Before You Open A Roth IRA
Do you want to save money for retirement? You may have heard several terms being tossed around the investment world such as IRA or Roth IRA and in this article I’m going to cover 3 important things you should know before you open a Roth IRA and start investing.
First off, you should know that IRA’s and Roth IRA’s are not investments but rather a tax shell for an investment. These tax shells give special tax benefits to the investor for saving their retirement.
An IRA carries a pretax benefit that means you will not pay one cent towards taxes until you retire and begin taking withdrawals from the account. On the hand though Roth IRA’s are the exact opposite or an IRA. With a Roth IRA it allows you pay taxes up front so when you retire you will not have to pay one cent on the money you withdrawal from the account.
Second, their are a few rules that you need to fulfill in order to qualify for an IRA. First off you must have a job or a source of income, however their is one exception for nonworking spouses. A nonworking mother or father can qualify for a spousal individual retirement account that will allow them to set up their own IRA as long as the other spouse has an income and that the couple files jointly on their tax returns.
On top of that all the other eligibility rules still apply like the the income limit of $177,000 for couples filing jointly, and that they are only allowed to contribute up to $5000 a year and an extra $1000 if they are age 50 and older.
Finally, the last thing you should know about IRA’s is that you can pick any type of investment you want to go inside them as long as it is a qualifying investment. For example you could buy annuities, set up a mutual fund, use a certificate of deposit, stocks, bonds, even gold will qualify.
However you will want to be careful of the investment you choose by talking to an investment professional with experience who can help you sort out the best way for you to get started on the road to retirement.