Which Investment Companies Should You Open Your Roth IRA With?
Published 2/27/08 (Modified 6/17/11)
So you're thinking of opening a Roth IRA account? Congratulations! Although it's only one small step forward in sound financial planning, it's one giant leap towards building your financial future and saving for retirement. By now you've likely settled on which investment retirement account (IRA) vehicle is best for you. There are three major types - Roth IRA, deductible IRA, and the non deductible IRA. All offer tax deferral benefits but the retirement account that is most appropriate for the majority of ordinary individuals and married couples is the Roth IRA. Unlike traditional IRA's (both tax-deductible and non-deductible), Roth IRA's enjoy several great advantages and benefits which make them very attractive for those who want to invest and plan for their future retirement. Here is what every prospective Roth IRA investor and account holder should know:
- Withdraws from Roth IRA's after age 59.5 are generally not taxed, because you pay your taxes on the front end by contributing after tax dollars.
- Because most people steadily increase their total income over time as they get older, they usually either stay in the same marginal tax bracket or end up at a higher bracket level at retirement. Thus, Roth IRAs enable savvy savers at retirement to accumulate more money than even tax-deductible IRA's.
- Unlike a traditional IRA, not everyone is eligible to open and contribute to a Roth IRA. For both 2009 and 2010, the Roth contribution limit is $5,000 as long as your income falls below $105,000 if you're single, and $166,000 if you're married filing a joint tax return. There are income phaseouts after that.
- Unlike a traditional IRA, with a Roth you can withdraw your original contribution money at any time for any emergency reason, tax free, and without penalty and you don't have to replace the funds, unlike a 401K or a traditional IRA. Of course, it's always best not to withdraw because that stops the compound interest process.
Choosing The Best Broker To Open Your ROTH IRA Account With, And What To Look For: