The most common of the IRA plans available is the traditional IRA, which is tax-deductible upon contribution. Thus, all withdrawals from such account are taxed as a regular income. Early withdrawals are also charged an additional of 10% penalty, not unless the account holder is at least 59 and 1/2 years old by the time he makes this withdrawal. There is a mandatory minimum required distribution when the investor reaches the age of 70 and 1/2 years. This will be based on his life expectancy, and the account must be zeroed out by the time he reaches his life expectancy age.

Another popular type of IRA plan is the Roth IRA, which is most preferred by those people who expect to belong to a higher income tax bracket upon retirement, as the distributions are totally tax-free provided that these are in accordance to certain rules, because the contributions to Roth are taxed right away. The account holder must be at least 59 and 1/2 years old, and the money must have stayed in the account for at least five years in order to qualify for a tax-free and penalty-free withdrawals. There is no such mandatory nor minimum amount of distribution being required for Roth IRA, therefore the account holders have the liberty to get just enough amount according to their needs.

Roth IRA Qualifications

The biggest qualification for a Roth IRA is income; you need to have a specified maximum income in order to participate. This income doesn’t necessarily need to be partly or entirely from wages, it can include such things as fees, commissions and even rental income and royalty payments.
As of mid-2010, the earnings limits are as follows:

If you file your taxes either singly or as married filing singly, you are allowed to declare earnings of $105,000; if married and filing jointly, the earnings limit for husband and wife combined is $167,000. There are no age limits with a Roth IRA plan, although there are restrictions on the amount that can be contributed in a year.

Roth IRA Withdrawal

It is possible to make a Roth IRA withdrawal, although there are various qualifications that you must meet. There are no penalties and no tax is paid to withdraw, as long as the money has been in the account for at least five years. To withdraw, you also have to be older than 59 and a half; or the money is needed to buy a first home or in case of death or disability. If you don’t meet these requirements, it’s still possible to withdraw your money, although you will have to pay various taxes.
If you meet the Roth IRA qualifications, it makes an excellent retirement plan, with several advantages over other plans. The sooner you open your account, the sooner you can start looking ahead to retirement.