When can you use a Roth IRA
If you are looking into investing in a retirement fund you may be wondering when can you use a Roth IRA. Some of your work colleagues may be telling you it's the best and you should start one or switch from a traditional IRA. There are a few determining factors as to when you can use a Roth IRA.
1. You filling status. This can be important for those that make a lot of money. There is an income cap for Roth IRA's. If you are filling jointly, you can't make more than $160,000. If you are single or "head of household", etc, you can't make more than $110,000. If you are married, live together but file separately, you can only make $10,000. If your income falls below any of these ranges then you can use a Roth IRA. If you make more than these income caps then you are not allowed to contribute to a Roth IRA.
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2. When you want to be taxed on it. When you use a Roth IRA for investing in, you will get taxed before you make any contributions. This means that when you take out any contributions you made into your Roth IRA you will not get taxed on them. If you can pay the taxes now and you feel that you will be in the same or a higher tax bracket when you retire then you can and should use a Roth IRA.
3. Earnings from the Roth IRA. The earnings from the Roth IRA make the IRA easy to use. The earnings from a Roth IRA will most likely not be taxed, or have any penalties. You can use a Roth IRA and not be taxed on the earnings you get when you withdraw after the age of 59 and a half. It must be at least 5 years after you started the Roth IRA before you make any withdraws. There are other qualified distributions, like if the Roth IRA owner is deceased, then the beneficiary may withdraw the funds. If the Roth IRA owner becomes disabled before age 59, he or she can withdraw with no penalties or earning s taxed.
4. When you want to withdraw the funds. With the Roth Ira you can withdraw at any time the funds you have put in. You may not be able to withdraw the earnings, unless you qualify. But you can use the contributions you put into the Roth IRA when you want to. Some companies may have different policies for the company employees. Like if you are currently working for the company you have your Roth IRA with they may not let you withdraw any funds from your Roth IRA. Check with your company's policy if your Roth IRA is through an employer. .
5. How long you want to contribute. If you want to contribute past the age of 70 and a half years of age, then you can use a Roth IRA to invest in. There is no age limitation on a Roth IRA. You can continue to contribute for as long as you like.
6. No RMD for contributor. There is no Required Minimum Distributions on A Roth Ira. This means that when you reach age 70 and a half you will not be required to withdraw any amount from your Roth IRA or the earnings you have received. When you are not planning on taking out funds from your IRA until after age 70 and a half, then you can use the Roth IRA and be farther ahead in your retirement investment.
When you are thinking if using a Roth IRA you can look at the benefits mentioned above and know these great facts too. There is the same contribution cap for Roth and Traditional IRA, in the year 2008 it is $5000. Another benefit you can use with a Roth IRA is that you may be eligible for a "savers tax credit" when you file you taxes.
